So kid starts college in fall 2017. 1098T shows nothing in box 1 for payments. Box 2, amounts billed, shows $9,000. Scholarship box shows $12,000. To complicate matters, the $12,000 was sent to school in 2017. However, only $6,000 was applied to account in 2017. Other half was applied in 2018.
Parent receives 1099Q from 529 plan, reporting Gross Distribution of $15,000, and I have a breakdown of earnings & basis.
Tuition was billed in 2017 for fall semester 2017 and spring 2018, $5,000 each. Same for room and board for $4,800 for each semester.
Per the on-line account summary, a total of $15,000 in payments were applied to the account for 2017; $6,000 in scholarships and $9,000 from parents.
Am I correct that for 529 purposes, my qualified education expenses paid are $9,000, the amount the parents paid? Then the difference between the $15,000 and the $9,000, will be taxable (based on the allocation between earnings and basis, plus possibly a penalty?
I want to see if I have a handle on this part before I play with making part of the scholarship taxable. Never had anyone with a 529 distribution before. I'm concerned the way the scholarship is handled is going to create a problem.