Can you get $10,000 for college through tax benefits?

[politeperson]

@MAmomto4

One of the things that I got out of it, I think I understood, was that if you pay 100% out of your 529 you won’t qualify. So you want to make sure that you pay at least $4000 from another source, either cash you have outside of 529, or with the federal loans.

So that is helpful to know before you start making tuition payments.

This is a commonly held belief but is not accurate.

One can pay all expenses from a 529 and still claim the AOTC. The net result is simply a tax, but not penalty, on the earnings portion of 4k of the 529 distribution. The IRS explains how to coordinate these benefits in the QTP section of Pub 970, which is the go to resource for education tax benefits:

Publication 970 (2022), Tax Benefits for Education | Internal Revenue Service