Question

TT Shows $0.00 for Form 1098-T this year - worked fine last year

Forum|Forum|4 years ago
March 20, 2022
1 reply
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I am the parent of a 22 year old full time student. We claim him as a dependent and pay for his tuition, books, fees, etc.

In 2021, we withdrew $17,000 from our 529 plan: Part of that was for expenses that we should have withdrawn funds for in 2020 (tuition was due in December 2020, but we didn't take out funds from the 529 until January 2021).

The Form 1098-T has $10,300 in Box 1 for the total cost of tuition for the year. When I enter that amount into TT, I get a message stating that we "are not eligible for the education credit. Here is why you may not qualify:

1. Somebody else can claim you as a dependent

2. QTP Distributions exceed the education expenses

3. There were no net qualified education expenses"

I can understand not getting credit for the difference from what we withdrew and what we paid ($17,000 - $10,300), but it looks like we're getting zero credit for the $10,300 tuition we did pay for.

Any ideas?? Thanks!!

D

DavidD66

You can’t double-dip tax breaks—that is, claim the AOTC or Life Time Learning Credit for the same expenses you paid with tax-free money from your 529 plan.

You can claim an education credit such as the American Opportunity credit (Hope credit) or Lifetime Learning credit in the same year that you withdraw funds from a 529 plan. But your 529 withdrawal will not be free from federal income tax, though, if you apply the 529 withdrawal and one of these education credits against the same qualified higher education expenses.

529 plan distributions must be made during the same tax year that the qualified expenses are incurred. The $17,000 you withdrew from your 529 in 2021 is only tax free to extent you used it to pay qualified education expenses in 2021. You cannot apply 2020 tuition payments. Room and board are also qualified expenses for 529 Plans.

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