Does the student pay the taxes n 529 distributions if he is claimed on a parents tax return?

Forum|Forum|4 years ago
April 11, 2022
1 reply
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Here is the scenario;

Regarding my grandson, My daughter is preparing his taxes for him through TurboTax. She is divorced, and claims him as a dependent. She files head of household. He is 19 years old and is a freshman at college.

He received the 1098-T from the school and 3 separate 1099-Q forms from when his father cashed out of some 529 plans and paid those directly to the school. UTMA based 529 with his father as the custodian.

My daughter entered in all (3) 529's into turbo tax (About $19K) and now her son owes about $1400 to the IRS. It says he is not able to claim the tax break because he can be claimed on someone else's tax return.

Does this sound right? His father says to just not report the 1099-Q's.

Not A Product Question

JillS56

The 1099-Q does not have to be claimed on a tax return. As long as the total of all 529 distributions does not exceed his total qualified educational costs, he does not have to report the 1099-Q. If the amount exceeds the qualified educational expenses, then the excess should be reported as other income on Form 1040.

epistuff1Author

Jill,

Thanks for that quick reply. One other bit of information... The 1098-T from the school, box 1 shows about $9,800.00. The total for all (3) 529's add up to about $19,000

Regards,

Jim

AmyC

Employee

The 529 distributions can go towards room and board and still not be taxable. So, tuition is $9800. All books, other items required for an education, room and board add up to $9200 or more, the 529 distributions would not count and the forms do not need to be entered. If that is not the case, then one of the 529s may need to be entered and tax paid.

Depending on the college and expenses, there may be enough expenses to allow the child to claim some additional income and allow you to claim an education credit. The rules changed this year. Please read another post of mine for a potential increase in refund.

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