Question

529 and scholarships with excess withdrawal

Forum|Forum|6 years ago
February 4, 2020
1 reply
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received 1099q from coverdell plan of (box1- $26,000 ;box2-$15,000;box3-$11,000) and 1099q from a 529 plan (box1-$37,000;box2-$25,000;box3-$12,000). Education exp (1098t-box1-$49,925 with box 7 and 8 marked and box5-$18,000; room/board $12,500; books not a condition $628.) Have taken AOC two tax years. Child is the beneficiary/recipient.

1.) It seems turbo tax does not use all of the scholarship dollars to reduce penalty why?

2.)Can I claim AOC on my tax return, considering withdrawal $63,000 and scholarship is $18,000 are higher vs expenses $63,153?

3.) I would like to shift what ever tax liability to child. Child has income of $16,000 (w-2). I was going to complete turbo tax 1099 and 1098 on my return to establish AOC credit and do the same on child's return to pay tax.

KrisD15

If you enter the 1099-Q and 1098-T and click "Maximize My Tax Break" the program will allocate distributions, scholarships, and expenses to give you the best bottom line.

The tax liability for scholarships not allocated to tuition (perhaps used for room and board) are taxed to the student.

The tax liability of the distribution is taxed to the recipient listed on the 1099-Q. If the funds are directly transferred to the school, the 1099-Q should come to the student.

You enter the forms first into your program so the software can do the math.

Enter 1099-Q

Enter 1098-T

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