UTMA 1099B

Forum|Forum|4 years ago
March 10, 2022
1 reply
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My son who is 18 and a full time high school student has a UTMA from his grandparents that my wife is custodian over. We used the funds from that account to pay for private school (an ADHD School). We sold the shares of the mutual fund in that account to pay for the education. He received a 1099-B this year and he has jobs where he earned 3600 in income and a roth ira that has been funded with 3200 for 2021. We are trying to file a return for him but don’t know where to offset the income from the 1099B for the education expense. His income from the 1099B is 15k with a cost basis of about 6.5k so it adds to his income 8k.

rjs

Employee

You can't offset the income with education expense. On the federal tax return there is no deduction for education expense below college level.

Your son's income is low enough that if the capital gain is long-term he will not have to pay any tax on it. It will be taxed at a 0% rate. You have to enter the long-term capital gain in his tax return, and it will be included in his income, but it will not increase his tax.

Hal_Al

Employee

The long-term capital gain in his tax return, will be included in his income, but it will not increase his tax UNLESS his parent's income is high enough for the kiddie tax on capital gains to kick in.

Be advised, that unlike 529 and ESA accounts, UTMA accounts do not get special treatment when the money is used for education, whether high school or college.