removeps-groups[at]yahoo.com wrote:
- quote -

written you start with the total amount of qualified expenses.
You subtract the amount paid with tax-free scholarships, grants,
etc. You subtract the amount of qualified expenses used to obtain
the credit. The result is the adjusted expenses. Using the amount
of the QTP distribution that represented earnings, you could then
compute the taxable part of the QTP distribution. Pub 970 has an
example of this. Don't overlook the fact that qualified expenses
for a QTP are defined differently then qualified expenses for the
credit. QTPs include reasonable room and board.

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On Dec 23, 12:26 pm, "sfcnm-...[at]yahoo.com" <nam...[at]gmail.com> wrote:

- quote -

So can you pay say 100% minus $1000 dollars from the QTP, and $1000
from your pocket, and claim the credit? The QTP and cash are used to
pay different expenses -- namely different portions of the tuition.
Or maybe I'm pushing the envelope too far here. Or maybe you can use
the QTP to pay 100% of the tuition, and your hard-earned cash to pay
for student fees and books required as a condition of enrollment, and
then claim the credit for the fees and books.

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On Dec 23, 3:26*pm, "sfcnm-...[at]yahoo.com" <nam...[at]gmail.com> wrote:
- quote -

The example (Sarah Clarke) on page 50 of Pub 970 shows where the
parents claim a Hope Credit of $2200,
creating additional income of $714 for their dependent daughter. It
is apparent that they are better off taking
the credit--the catch is having an AGI low enough to qualify for the
Hope Credit (the Lifetime Learning Credit
would not be as advantageous).

Many people just take the tax-free distribution when they should be
looking at the possibility of claiming a
credit and having their child declare the income.

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On Dec 23, 3:26*pm, "sfcnm-...[at]yahoo.com" <nam...[at]gmail.com> wrote:
- quote -

This is my interpretation.

Others are telling me that the contribution was taxed, therefore the
529 withdraw is partly a contribution, and that portion of the
distribution qualifies for the credits.

I cannot find a definitive answer.

Appreciate both responses thus far, thx.

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On Dec 23, 12:19*pm, jIM <noreplysoc...[at]hotmail.com> wrote:
- quote -

The Pub is quite clear. You can't obtain a tax benefit unless you paid
the qualified educational expenses with funds other than those that
are tax-free. If the 529 distribution is a qualified distribution and
therefore tax-fee, then you can not use any of the expenses paid with
the distribution for another benefit.

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- quote -

Usually no, as you get the benefit of a tax-free distribution if it
was used for qualified expenses.

However, I recall recommending that a client take the credit and
declare the distribution as income
but it wasn't a straightforward process--the original contributions
and earnings are used to
calculate the taxable amount--I'm sure it's in Pub 970.

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Does a withdraw (distribution) from a 529 plan reduce the eligibility
of the Hope or Lifetime learning credit?

In pub 970 (page 50) I read

"A Hope or lifetime learning credit (education credit) can be
claimed in the same year the beneficiary takes a tax-free
distribution from a QTP, as long as the same expenses are not used for
both benefits. This means that after the beneficiary
reduces qualified education expenses by tax-free
educational assistance, he or she must further reduce
them by the expenses taken into account in determining
the credit."

If tuition is 100% paid from 529, is a person eligible to claim any of
the education credits?

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