why are we being told to pay taxes on the earnings of a Qualified Tution Program?

Forum|Forum|11 months ago
April 14, 2025
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My husband just completed tax returns both our kids. Neither had income. Both received a 1099Q with info for Gross Distribution, Earnings and Basis. My husband entered all this in turbo tax and both returns ended up with owing taxes on the earnings even though all distributions were for Qualified Educational Expenses. Other than a couple of Chromebooks and textbooks, all funds were sent directly to their school. Receipts for the Chromebooks and textbooks were submitted and apparently deemed to be qualified educational expenses as my husband was reimburses.

My husband said he followed all the prompts as far as entering info for the 1099Q, but there was no prompt to enter the amount of Qualified Educational Expenses. I am thinking that this info is somehow missing and that is why tax is due. Any help on this would be appreciated.

Thanks!

Best answer by KrisD15

After entering Form 1099-Q, continue in the

Deductions & Credits

Education

Section

Go to

"Expenses and Scholarships (Form 1098-T)" and enter the 1098-T from the schools.

If you don't have that Form, have the students get a copy from their online school accounts.

KrisD15Answer

After entering Form 1099-Q, continue in the

Deductions & Credits

Education

Section

Go to

"Expenses and Scholarships (Form 1098-T)" and enter the 1098-T from the schools.

If you don't have that Form, have the students get a copy from their online school accounts.

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joypAuthor

This worked initially and tax amount went to zero, but then my husband got a message that the 2 amounts (1099Q and 1098-T) didn't match and he can't go further.

Other than tution (which is on the 1098-T), we submitted a receipt to be reimbursed for a text book that wasn't purchased from the school (so not on the 1098-T). Not sure how to show that expense, but it IS a Qualfied Educational Expense since a text book was required by the course.

We also submitted a receipt for a Chromebook. A computer is required for students, but I cannot find that statement on the school's website yet. When I do, how do I show this?

Any help that can be provided is most appreciated. Twins in college--we need all the help we can get!

AmyC

Employee

1. Enter expenses: from the education summary - edit the areas that need correction.

2. If the 1099-Q was completely used on 529 qualified Room and Board and Qualified Education Expenses - Internal Revenue Service then the Q does not need to be entered. IRS Publication 970, Tax Benefits for Education states:

Page 45: Don't report tax-free distributions (including qualifying rollovers) on your tax return.

3. If you have additional expenses for tuition and fees, you may be able to claim the education credit. If you qualify for an education credit, that is the first goal. You cannot claim the credit if your MAGI is over $90,000 ($180,000 for joint filers).

I don't know if there are scholarships in box 5 so I will answer as if there are.

Step 1 -Do you qualify for an education credit (see What You Need to Know about AOTC and LLC

Yes, can claim the credit:

Are the scholarships restricted to paying for tuition?

If restricted, remove those funds from the eligible scholarships.
If not restricted, excellent.

How much tuition is in box 1 - we need $4k for AOTC or $10k for LLC

For AOTC
If less than $4,000 we want to use it all and make the scholarships go 100% toward room and board.
If more than $4,000, scholarships can cover the amount over $4,000 and the rest to room and board.

No, can't claim the credit: