Free Worry-Free Audit Support is available only for clients who purchase and use H&R Block desktop software solutions to prepare and successfully file their 2022 individual income tax return (federal or state).Talk to one of our knowledgeable tax pros in your local tax office today. We understand that this is a complicated process. Subtract your 529 withdrawal from your adjusted qualified education expenses for 529 plan purposes.Reduce your qualified education expenses by the amount you used to claim the American Opportunity Credit. This includes expenses for room and board (if the student is enrolled at least half-time) and the purchase of computer equipment used primarily by the student while enrolled. You also might want see if you have additional education expenses that didn’t qualify for the credit, but do qualify for tax-free distributions from a 529 plan. You can only use up to $4,000 of qualified expenses to claim the credit. You’ll use the number you wrote down from step one. If the number you get is positive, you can claim the American Opportunity Credit under IRS rules.If the number is zero or less than zero, you don’t qualify. Write the number down and go to the next step. If the number is more than zero, you have qualified expenses for the American Opportunity Credit. Subtract the amount of tax-free scholarships from the qualified education expenses for the American Opportunity Credit.Take the information you collected and follow these steps to see if you meet the qualifications for the American Opportunity Credit: You’ll also need the amount of any scholarships, grants, and fellowships your child received, and what those amounts paid for. This includes tuition, fees, and course materials. To see how your 529 withdrawal and the American Opportunity Tax Credit qualifications interact, calculate your child’s qualified education expenses for the American Opportunity Credit. American Opportunity Credit Qualifications This will help you determine if you can claim the IRS American Opportunity Credit without paying taxes on your 529 withdrawal. First, you need to gather information about your child’s education expenses, as well as any tax-free scholarships they received. Though this way might be best for you, you might need to calculate your taxes in a different way. You can use the H&R Block Tax Software or our online program to try out different combinations and see which works best for your situation. Then, you can calculate how much of your 529 withdrawal is taxable. Ex: It might be best to claim the American Opportunity Credit with the IRS, and then reduce qualified education expenses for 529 plan distribution purposes by the expenses used to claim the credit. There are a few different ways your 529 and the American Opportunity Credit can be used together. If you paid for your child’s college expenses from a 529 plan, you might still be able to claim the IRS American Opportunity Credit.
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