clarification on 1099-Q form needed and 529 expenses

Forum|Forum|4 years ago
May 9, 2021
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Hi,

I have two kids in college each with 529 accounts. All distributions were for qualified expenses, and I'm not applying for any of the 3 education tax credits. I have calculated expenses for both and the expenses are equal or slightly exceed what I withdrew from the 529 accounts. I'm not sure if it matters but distributions were made to me and not the beneficiaries. From what I have read, I can just remove the 1099-Q forms. Is that correct? What about the 1098-T. Both students have small scholarship amounts, do those count as income for me since they are both still reported as dependents?

Thanks for the help.

--Tim

Hal_Al

Employee

Q. From what I have read, I can just remove the 1099-Q forms. Is that correct?

A. Yes.

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."

Q. Both students have small scholarship amounts, do those count as income for me since they are both still reported as dependents?

A. No.

If it is income, it goes on their own tax returns, not yours, even if they are your dependents. The scholarships are not taxable unless the amount of scholarships exceeds their qualified expenses after subtracting expenses allocated to the 529 money.

Depending on how much other income they have, the taxable amount of scholarship under $12,400 is not taxed.