My child will attend college in 2018 and I would like to estimate the income tax impact of the 529 plan withdrawals. She will have $5000 earned income and no unearned income except for the withdrawals.
She will have $2000 scholarship which I plan to withdraw from 529. The 529 are about ½ contribution and ½ earning. So there is $1000 unearned income. The standard deduction is $350, so the tax should be $75 (10% of $750). Form 8615 request the form to be included in the filing even though this is not enough to trigger “kiddie tax”. Does she have to file 8615 (if this is the only tax due)?
We plan to also withdraw $4000 due to AOTC. This will make a total $3000 unearned income, and trigger “kiddie tax” (which at this low level is also 10%). So the tax due is about $275, and Form 8615 will need to be filed.
Are my assumptions correct?