529 Distribution used for student loans

Forum|Forum|5 years ago
March 7, 2021
1 reply
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I thought part of the Secure Act that parents can withdraw from 529 account tax free to pay for student loans as part of qualified education expenses up to $10,000.

As a parent and the recipient on 1099-Q, the Earnings is being picked up as Other Income on Schedule 1 and Additional Taxes on Schedule 2.

The 529 withdrawal was $5400+ and the Student Loan payment was $5500

Did I misinterpret the Secure Act or do I have something entered incorrectly?

Hal_Al

Employee

You entered something incorrectly.

The student loan question comes up in the 1099-Q interview, so you don't have to wait til the education expenses section to enter it.

ptdusky

Employee

But it still shows as excess even after entering that it is a loan!

Hal_Al

Employee

Delete the 1099-Q.

You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including student loan payments to cover the distribution. 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. But, it will prepare a 1099-Q worksheet for your records.

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 must determine the taxability of any distribution."