Transparent calculator methodology
Give each qualified college expense exactly one tax job
College expenses may support a tax-free 529 withdrawal or an education credit, but the same expense cannot support both. This optimizer keeps the allocation visible and compares the federal tax effect of reserving different amounts for the American Opportunity Tax Credit.
What the estimate includes
- AOTC-eligible tuition, fees, and required course materials
- 529-only computer, internet, and eligible room-and-board expenses
- Tax-free scholarships and an optional user-verified taxable allocation
- Form 1099-Q earnings, regular income tax, and potential additional tax
How the comparison works
The calculator subtracts tax-free assistance once, tests every possible AOTC reservation from zero through $4,000, then applies the distribution earnings ratio to any 529 amount left without adjusted qualified expenses. It ranks the tested allocations using the entered credit-availability and federal tax-rate assumptions.
Important limitation
This is an allocation estimate, not a complete tax return or eligibility determination. Verify award restrictions, AOTC eligibility, the distribution recipient, school room-and-board limits, state tax consequences, and all Form 1099-Q figures before filing.