Skip to main content
March 20, 2024
Question

other education expenses

  • March 20, 2024
  • 2 replies
  • 0 views

I am entering this for 2 kids.  Both had 529 money and I entered the 1099Q for both.  However, I am only getting the extra 4 boxes under other education expenses for one of them. anyone know why?

 

    2 replies

    SharonD007
    March 20, 2024

    You only need to enter the 1099-Q distributions if the distributions exceed your dependents' qualifying educational expenses. Are the 1099-Q's in your name or your dependent's names? Depending upon whose names the 1099-Qs are in, depends on whose tax returns they go on. Please clarify and give us additional information.

    **Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"
    madisan2Author
    March 20, 2024

    Your reply was not helpful.  I have two kids and the 1099q is set up the same for both.  I get the money for them.  but for one the software allowed me to enter the room and board but for the other it did not.  It worked fine for me for both kids last year.  

    madisan2Author
    March 21, 2024

    I played around with it and it seems it is because he made too much money to be a dependent.  He graduated in June and started working right away, so of course he's making more than enough to be a dependent.  I guess we'll run his taxes and see who gets the best break.

    Hal_Al
    Employee
    March 21, 2024

    Go through the entire education interview until you reach a screen titled "Your Education Expenses Summary".  Click edit next to the student's name. That should take you to a screen “Here’s your Education Summary”. Click edit next to the section you want to edit.  To get to the room and board entry place, click edit at "other education expenses". You will not get the place to enter Room and board if you didn't previously enter the 1099-Q.

    Hal_Al
    Employee
    March 21, 2024

    Qualified Tuition Plans  (QTP 529 Plans) Distributions

    General Discussion

    It’s complicated.

    For 529 plans, there is an “owner” (usually the parent), and a “beneficiary” (usually the student dependent). The "recipient" of the distribution can be either the owner or the beneficiary depending on who the money was sent to. When the money goes directly from the Qualified Tuition Plan (QTP) to the school, the student is the "recipient". The distribution will be reported on IRS form 1099-Q. 
    The 1099-Q gets reported on the recipient's return.** The recipient's name & SS# will be on the 1099-Q.
    Even though the 1099-Q is going on the student's return, the 1098-T should go on the parent's return, so you can claim the education credit. You can do this because he is your dependent.

    You can and should claim the tuition credit before claiming the 529 plan earnings exclusion. The American Opportunity Credit (AOC or AOTC) is 100% of the first $2000 of tuition and 25% of the next $2000 ($2500 maximum credit). The educational expenses he claims for the 1099-Q should be reduced by the amount of educational expenses you claim for the credit.
    But be aware, you can not double dip. You cannot count the same tuition money, for the tuition credit,  that gets him an exclusion from the taxability of the earnings (interest) on the 529 plan. Since the credit is more generous; use as much of the tuition as is needed for the credit and the rest for the interest exclusion. Another special rule allows you to claim the tuition credit regardless of whose money was used to pay the tuition.
    In addition, there is another rule that says the 10% penalty is waived if he was unable to cover the 529 plan withdrawal with educational expenses either because he got scholarships or the expenses were used (by him or the parents) to claim the credits. He'll have to pay tax on the earnings, at his lower tax rate (subject to the “kiddie tax”), but not the penalty.

     

    Total qualified expenses (including room & board) less amounts paid by scholarship less amounts used to claim the Tuition credit equals the amount you can use to claim the earnings exclusion on the 1099-Q. 
    Example:
      $10,000 in educational expenses(including room & board which is only qualified for the 1099-Q)

       -$3000 paid by tax free scholarship***

       -$4000 used to claim the American Opportunity credit

     =$3000 Can be used against the 1099-Q (on the recipient’s return)

     

    Box 1 of the 1099-Q is $5000

    Box 2 is $2800

    3000/5000=60% of the earnings are tax free; 40% are taxable

    40% x 2800= $1120

    There is  $1120 of taxable income (on the recipient’s return)

     

    **Alternatively; 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 at home) to cover the distribution. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. Again, you cannot double dip!  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, in case of an IRS inquiry.

    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." 

    ***Another alternative is have the student report some of his scholarship as taxable income, to free up some expenses for the 1099-Q and/or tuition credit. Most people come out better having the scholarship taxable before the 529 earnings. A student, with no other income, can have up to $13,850 of taxable scholarship (in 2023) and still pay no income tax. 

    madisan2Author
    March 21, 2024

    The interesting thing about all of this information is that it doesn't say your child can make too much money for you to claim him as a dependent.  If that happens, the parent cannot report the room and board expenses from the 1099q.  The student has to. That really is only our situation because he had only one semester of school left in 2023 and then started working full time.