Interesting. The Code section in Publication 970 indicates the expenses but does not clarify whether the tx free earnings or the basis must be coordinated to claim the AOTC. In another publication through Forbes, the interpretation is "It is very important to remember that you cannot claim any of the college tax credits, including the AOTC, based on expenses that were used to calculate the tax-free portion of a distribution from a 529 college savings or prepaid plan, or a Coverdell Education Savings Account (ESA). The AOTC may be claimed in the same year that a tax-free distribution is made as long as the same expenses are not used to calculate the tax-free distribution AND the American Opportunity Tax Credit." The basis of the 529 is not tax free. It is after-tax funds in a tax-favored account. I interpret the tax-free portion to be the tax qualified earnings. This is a very murky code. Hey CPAs out there, where do you stand on this interpretation? Joe Hurley, what are your thoughts?