Question

1099Q and American Opportunity Credit

Forum|Forum|6 years ago
February 19, 2020
1 reply
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Should I enter my 1099-Q amounts? I should not have to pay taxes on earnings. However, when I don't include this it says I qualify for the American Opportunity credit? I don't think this is correct. What do I do?

K

klehnhardt

Yes, you should enter the information on the 1099-Q form. If you have education expenses in excess of the total withdrawal, including interest, you will not be taxed on the earnings.

Paying all your educational expenses with the tax free 529 withdrawal will reduce your expenses and not allow you to take the American Opportunity Credit.

If you do not use the 529 withdrawal on your educational expenses, it will become a Non-qualified 529 Withdrawal.

If you have a taxable 529 withdrawal, you' will owe a 10 percent withdrawal penalty in addition to the income tax on the taxable earnings portion of your distribution.