I have a newly emancipated customer that finished her undergraduate degree in May of 2019. An AOC had been claimed for her, the 4 prior years, on parents return.
She had $ 4,410 in tuition in the spring of 2019, paid per a 529 withdrawal. The 2019 1099-Q shows $ 1,521 int. & $2,889 basis.
The 529 distribution was used for qualified education expenses, so the it would normally be tax free to her, but I'm wondering if it would be allowable
(or possibly advisable) to have her claim the 20% lifetime credit on this tuition and pay tax on the 529 interest distributed, instead. Her marginal federal tax bracket is 12%.
It is my understanding that no penalty would be assessed on the tax for the interest in this situation under the exceptions allowed (TTB pp 12-7).
Any comments on this would be appreciated.
She had $ 4,410 in tuition in the spring of 2019, paid per a 529 withdrawal. The 2019 1099-Q shows $ 1,521 int. & $2,889 basis.
The 529 distribution was used for qualified education expenses, so the it would normally be tax free to her, but I'm wondering if it would be allowable
(or possibly advisable) to have her claim the 20% lifetime credit on this tuition and pay tax on the 529 interest distributed, instead. Her marginal federal tax bracket is 12%.
It is my understanding that no penalty would be assessed on the tax for the interest in this situation under the exceptions allowed (TTB pp 12-7).
Any comments on this would be appreciated.
Comment