Student loan repayment from 529 plan

Forum|Forum|2 years ago
January 7, 2024
2 replies
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Where does TT capture the information to record a loan repayment made from a 529 plan? On the section on income where it queries about cashing in EE bonds and expenses from a 529 plan? Or someplace else?

Best answer by Hal_Al

Q. Where is this information captured in TT? What section (s)?

A. In TurboTax (TT), enter at:

Federal Taxes Tab (Personal for H&B version)

Deductions & Credits

-Scroll down to:

--Education

--ESA and 529 Qualified Tuition Programs (1099-Q)

The interview will eventually present the loan payment question. There is no short cut, you have to go thru the 1099-Q interview.

Anonymous_

Employee

I'll page @Hal_Al

Hal_AlAnswer

Employee

Q. Where is this information captured in TT? What section (s)?

A. In TurboTax (TT), enter at:

Federal Taxes Tab (Personal for H&B version)

Deductions & Credits

-Scroll down to:

--Education

--ESA and 529 Qualified Tuition Programs (1099-Q)

The interview will eventually present the loan payment question. There is no short cut, you have to go thru the 1099-Q interview.

m67j66Author

Does that produce the form 8815 for exclusion of interest income?

Hal_Al

Employee

Q. Does that produce the form 8815 for exclusion of interest income?

A. No. But, you don't need or want form 8815. It is not applicable to this situation.

Form 8815 is ONLY for the exclusion of U.S. Savings bond interest, when savings bonds are cashed in a year that a student has had tuition paid. In fact, there is no IRS form for reporting when 529 distributions are used for education, including student loan payments. This is a problem; the IRS gets a copy of the 1099-Q and may not know that the taxpayer used the money for qualified educational expenses. We've seen several postings, in the forum, from parents who have received IRS inquiries about their 1099-Q. It happened to me, personally.

At least two users reported that they replied that their child was in college and the distributions were for qualified expenses, which they listed, but they did not provide receipts.. They later received a notices saying they were in the clear. In my case, just sending copies of school statements satisfied the IRS. We have noticed, here in this forum, that the number of 1099-Q notices, from the IRS has dropped off significantly in recent years. The IRS does also get a copy of the 1098-T, so they should at least know that the beneficiary is a student.