But, it will prepare a 1099-Q worksheet for your records, in case of an IRS inquiry. Again, you cannot double dip! When the box 1 amount on form 1099-Q is fully covered by expenses, TurboTax will enter nothing about the 1099-Q on the actual tax forms. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. **Alternatively you can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution. =$3000 Can be used against the 1099-Q (usually on the student’s return)ģ000/5000=60% of the earnings are tax free 40% are taxable $4000 used to claim the American Opportunity credit $10,000 in educational expenses(including room & board) Total qualified expenses (including room & board) less amounts paid by scholarship less amounts used to claim the Tuition credit equals the amount you can use to claim the earnings exclusion on the 1099-Q. He'll have to pay tax on the earnings, at his lower tax rate (subject to the “kiddie tax”), but not the penalty. In addition, there is another rule that says the 10% penalty is waived if he was unable to cover the 529 plan withdrawal with educational expenses either because he got scholarships or the expenses were used (by him or the parents) to claim the credits. Another special rule allows you to claim the tuition credit even though it was "his" money that paid the tuition. Since the credit is more generous use as much of the tuition as is needed for the credit and the rest for the interest exclusion. You cannot count the same tuition money, for the tuition credit, that gets him an exclusion from the taxability of the earnings (interest) on the 529 plan. The educational expenses he claims for the 1099-Q should be reduced by the amount of educational expenses you claim for the credit.īut be aware, you can not double dip. You can and should claim the tuition credit before claiming the 529 plan earnings exclusion. You can do this because he is your dependent. ** The recipient's name & SS# will be on the 1099-Q.Įven though the 1099-Q is going on the student's return, the 1098-T should go on the parent's return, so you can claim the education credit. The 1099-Q gets reported on the recipient's return. The distribution will be reported on IRS form 1099-Q. When the money goes directly from the Qualified Tuition Plan (QTP) to the school, the student is the "recipient". Qualified Tuition Plans (QTP 529 Plans) Distributionsįor 529 plans, there is an “owner” (usually the parent), and a “beneficiary” (usually the student dependent). The "recipient" of the distribution can be either the owner or the beneficiary depending on who the money was sent to. If you do enter it, enter the 1099-Q before you enter the 1098-T and other expenses. You must determine the taxability of any distribution." On form 1099-Q, instructions to the recipient reads: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You also cannot count expenses that were paid by tax free scholarships. But, it will prepare a 1099-Q worksheet for your records. When the box 1 amount on form 1099-Q is fully covered by expenses, TurboTax will enter nothing about the 1099-Q on the actual tax forms. You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution. The interview is just complicated because it has to handle multiple scenarios. See the student information worksheet (abbreviated Student Info Wk on the forms list).
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