Education Credits

[RWG1950]

Just wanted to make sure I haven't overlooked something.
My customer age 24 lived with his parents and was a full-time student for 5 mos in 2025.
Is now on his own & provided more than 1/2 of his own 2025 support.
He had used the AOC (because of parents income) for only one 1 year prior.
Had about $2,500 in tuition that was paid in full by a 529 plan. He had no other ed expenses of any related type.
Since his ed cost was covered by the 529 & he had no other expenses, he has nothing to use for the ed credits, right?
Thanks for comments.

[Anarchrist]

Correct . .

[kathyc2]

Likely paying tax/penalty on 529 earnings to take AOC will produce better results.

[rbynaker]

Likely paying tax/penalty on 529 earnings to take AOC will produce better results.

No penalty to the extent QHEE were used to claim education credits. See Pub 970 page 52 (2025) exception #5. "Included in income only because the qualified education expenses were taken into account in determining the American opportunity or lifetime learning credit"

Rick

[RWG1950]

The 529 is owned by the parent and the funds were apparently paid directly to the parent who then paid the tuition. 1099-Q shows parent as recipient.
So the son (who is otherwise eligible) claims the AOC on his return without regard to the 529 distribution and the parent claims the 529 distribution earnings on his return ?

[Lion]

Is the son a dependent of the parent?

[kathyc2]

The 529 is owned by the parent and the funds were apparently paid directly to the parent who then paid the tuition. 1099-Q shows parent as recipient.
So the son (who is otherwise eligible) claims the AOC on his return without regard to the 529 distribution and the parent claims the 529 distribution earnings on his return ?

https://www.savingforcollege.com/article/whose-tax-rate-applies-to-a-non-qualified-529-plan-distribution

[RWG1950]

What form does dad (the 529 owner) use to report the non-qualified 1099-Q amount he received and used to pay the tuition for his non-dependent son who will claim the AOC?
Will a penalty apply to this non-qualified distribution for dad?