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Income exceeds max limit for college deductions?

Forum|Forum|1 year ago
September 29, 2024
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I withdrew 45,000 from my daughter's 529 for her tuition which was 37,000 as reported on the 1099-Q. My AGI for last year was 600,000. Although I had other qualified college expenses Turbotax won't allow me to enter any additional college expenses and as a result I'm being taxed on the 8,000 of 529 withdrawals in excess of the reported tuition. I do not see that the IRS has any income limits on using 529 withdrawals to cover legitimate college expenses. How do I force Turbotax to allow me to enter college expenses because my "income exceeds the maximum limit"

TurboTax Home & Biz Windows

Best answer by Hal_Al

Normally you enter the 1099-Q at the 1099-Q section; then later enter the expenses at the 1098-T section. If that's not working (and it can get messy), here's simpler workaround in TurboTax:

Enter the 1099-Q. When asked who the student is answer: someone else not listed here (lying to TurboTax to get it to do what you want does not constitute lying to the IRS). Enter the student's name when asked. A few screens later, you'll get one simple screen to enter expenses. Press Done at the 1099-Q summary screen, to get there. You do not have to deal with the complicated “Educational expenses and Scholarships” (1098-T) section later.

If your expenses still don't add up to $45K, you don't pay tax on the difference ($8000 in your post). You pay tax only on a prorated amount of the earnings in box 2 of the 1099-Q. For the $8000, you would pay tax on 17.78% (8000 / 45,000) of the box 2 amount (plus the 10% penalty). TurboTax does the calculations and puts the numbers on the forms.

A

Anonymous_

Employee

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Hal_AlAnswer

Employee

Normally you enter the 1099-Q at the 1099-Q section; then later enter the expenses at the 1098-T section. If that's not working (and it can get messy), here's simpler workaround in TurboTax:

Enter the 1099-Q. When asked who the student is answer: someone else not listed here (lying to TurboTax to get it to do what you want does not constitute lying to the IRS). Enter the student's name when asked. A few screens later, you'll get one simple screen to enter expenses. Press Done at the 1099-Q summary screen, to get there. You do not have to deal with the complicated “Educational expenses and Scholarships” (1098-T) section later.

If your expenses still don't add up to $45K, you don't pay tax on the difference ($8000 in your post). You pay tax only on a prorated amount of the earnings in box 2 of the 1099-Q. For the $8000, you would pay tax on 17.78% (8000 / 45,000) of the box 2 amount (plus the 10% penalty). TurboTax does the calculations and puts the numbers on the forms.