I would like confirmation on a point which I state informally below, by paraphrasing the more formal text of Pub.970.
It has to do with a penalty of 10% of the taxable withdrawn earnings (in addition to the tax on it) that is in excess of any adjusted qualified educational expense (for 529 plans). The informal statement is: One can always withdraw money from a 529 plan up to the amount of a tax-free scholarship without the additional 10% penalty.”
I want to know if I have understood the formal language of Pub. 970. A specific situation I face is as follows:
Room and Board: 15990
Total Qual. Expenses: 74423
Used for AOTC: 4000
ADJUSTED Qual. Expenses: 60575 (=74423-9848-4000)