529 Withdrawal with Tuition Remission

Forum|Forum|2 years ago
March 25, 2024
1 reply
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Hi,

I am a new graduate student. My university covers my tuition via tuition remission, and it does not show up on my 1098-T. Am I allowed to still withdraw 529 funds without the 10% penalty (but is reported as taxable income) against the remitted tuition? As an undergraduate with a full scholarship (which was reported on the 1098-T), I could do this; but I am not clear if it is possible to due with tuition remission. Thanks.

TurboTax Premier Online

Hal_Al

Employee

Q. Am I allowed to still withdraw 529 funds without the 10% penalty?

A. Yes, claim the "scholarship" exception in TurboTax. Technically, it's a "tax free assistance" exception.

After entering the 1098-T, you will be asked if you had any scholarships not reported on the 1098-T. Enter the tuition remission amount.

If you have any problem getting TT to do that, reply back for a short cut. It should generate form 5329 with $0 on lines 7 & 8, to claim the exception (you'll see a worksheet in TT, that is nor sent to the IRS)

BabaBCAuthor

@Hal_Al: Thanks for the reply. One of my issues is that the 1098-T does not show the tuition costs. When I add the additional scholarship money, TT is counting this as income and taxing at ordinary income rates. Where would I add the tuition costs which can then offset the "additional" scholarship? Thanks.