Tax question about Coverdell ESA (education savings account) distribution and American Opportunity Credit

Room and board paid directly to school for a student going more than half time is an allowed expense for the Coverdell. So using money from the Coverdell for that is fine and incurs no penalty.

Those expenses (room and board) are not considered qualified education expenses for AOTC. So there is no point in trying to rethink the Coverdell distribution as non-qualifying.

The 2000 spent on tuition is a legitimate qualifying education expense for AOTC and that gets you 2000 in tax credit. For the next up to 2000 more in expenses (books? materials?) only 500 more in credit is gotten, i.e. at a 25% rate. So examine if there were any book costs and tack those on.

/r/personalfinance Thread