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April 14, 2022
Question

Paid off loan with 529 plan

  • April 14, 2022
  • 1 reply
  • 0 views

Our daughter accidentally got a loan for school.  When we found out, we used her 529 plan to immediately pay off the loan. That money did not show up on her 1098-T from the school. Is there another form we can ask for?  Its wrecking our refund showing we took money out of her 529 plan but no paperwork showing it was used for school.

    1 reply

    Hal_Al
    Employee
    April 14, 2022

    Just don't enter the 1099-Q, in TurboTax.  Paying off a loan is a qualified expense, as long as the amount was $10K or less.  There is a lifetime limit of $10,000.

     

    You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, i 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." 

     

     

    egloverceAuthor
    April 14, 2022

    Much Apprediated!