Double counting education expenses?

Forum|Forum|4 years ago
March 27, 2022
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I have a 529 account for my son's education. In 2021 there was a (smallish) distribution to me, and a large distribution to him. I am claiming him as a dependent.

Question 1: am I correct to list the 1099-Q I received on my return, and the one the child received on his return?

But my main concern is about the education *expenses*. I entered the 1098-T on *both* my and his returns--for me to receive the American Opportunity Credit, and for him to lower his taxable income from the 529 distribution (he has very little income otherwise). The tuition from the 1098-T shows up automatically.

So Question 2: can I also enter expenses for books, room and board, and computer expenses on *both* returns? Or, should they be on one return and not the other?

Note--for room and board I included rent and utilities--which add up to less than the lowest cost for a room on campus.

Thanks for your help.

ztrachtenbergAuthor

Forgot to mention--I covered rent and a few other small expenses with distributions form the 529--reflected on my son's 1099-Q.

Hal_Al

Employee

Question 1: am I correct to list the 1099-Q I received on my return, and the one the child received on his return?

Answer 1. Yes, if they even need to be entered. See below.

Question 2: Can I also enter expenses for books, room and board, and computer expenses on *both* returns? Or, should they be on one return and not the other?

Answer 2. Yes, they can be entered both places, but the 2nd entry(s) must be adjusted for the expenses used on the first entry. Simple way: don't enter your 1099-Q, at all. Enter the 1098-T, on your return to claim to claim the American Opportunity Credit(AOC). Then adjust the expenses on his return.

You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives off campus or at home) 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. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. You also cannot count expenses that were paid by tax free scholarships. You cannot double dip!

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."

If you have determined that some of the student's 1099-Q is taxable, enter his 1099-Q and 1099-T on his return. You will reach a screen “Amount Used to Calculate Education Deduction or Credit”, verify the amount you want to use or change it. In your case add any expenses needed for you small 1099-Q to the $4000 used to claim the AOC.