If your income is less than $180,000 (married filer) or $90,000 (single), you may be eligible for the American Opportunity Tax Credit while your student is in college. This is a credit of up to $2,500 annually, so nothing to sneeze at. Here’s the catch: You can only take the credit for expenses for which you did not use another tax benefit (i.e., for expenses paid out of a 529 account). In order not to forfeit the tax credit, you need to pay some of your qualified expenses out of pocket– or at least, out of a savings account that didn’t receive another education tax benefit.

Review the various education tax credits here before taking that last 529 account distribution.