2024 1098-T line 1 info not correct

Forum|Forum|1 year ago
February 15, 2025
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I directed my 529 administrator to transfer 2025 spring tuition payment to university on 12/23/2024. They mailed a check which was not received and posted by the college until 1/6/2025. It was not included on my 2024 1098-T . Can I adjust the amount on Line 1 of the 1098-T while entering into Turbo Tax, or is there another way to adjust the amount paid to avoid that 2025 spring tuition payment being taxed? (this seems very silly-and expensive for me).

AmyC

Employee

You won't adjust the 1098-T. I think you are confusing payments made the first 3 months of 2025 with classes beginning.

Payments made in 2024 for 2024 classes and classes that begin the first 3 months of 2025.
Payments in 2025 are for classes in 2025 along with the first 3 months of 2026 classes.

What I don't know is:

did you get a 1099-Q for the distribution? If so, use it against other eligible 529 expenses. Dorm or home, room and board usually exists as an expense.
do you qualify for the education credit or are there scholarships involved?

The 529 is used towards room and board, books, supplies, etc. Please look at another of my answers, here which includes scholarships and 529 withdrawals to get the education credit.

References:

Qualified Education Expenses - IRS & room and board

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cbacons4Author

Thank You Amy C for the reply! I'm not sure what you mean by "confusing payments made the first 3 months of 2025 with classes beginning". I understand that payments in 2024 can apply to spring 2025 tuition, the problem is that the payment I intended to make in 2024 apparently did not arrive until Jan 2025 thus didn't make the cutoff to be on the 2024 1098-T. I did receive a 1099-Q with the 12/23/24 distribution for 2025 spring semester included. The problem is that the college didn't receive (or post) it until 1/6/2025 so wasn't included on the 2024 1098-T. That makes it trigger as a distribution that didn't pay for anything, and that turns (I guess the 529 gains) into income which creates more taxes for my daughter. (My original question was written 1st person for simplicity but the subject is my daughter's 529 and college).

There are scholarships involved, all shown on the 1098-T and from the college. If the 2024 1098-T had included the payment made for spring 2025 tuition all would have come out even: i.e. the combined total of the 1099-Q distribution and the scholarships shown on the 1098-T would equal the payments made in the 1098-T. I have filed for and am eligible for the full AOTC. I don't understand how I "apply" room and board(she's renting a shared apartment and buying food), books, and supplies first and then allocate the rest. Do I do that in turbotax or on my legal pad? All the distributions from the 529 actually did pay tuition, so isn't that lying to allocate them elsewhere? Do I need to have actual receipts for room and board? She is splitting rent 4 ways in a casual agreement and Venmoing one of the mom's who is actually paying the rent, so there are no receipts.

AmyC

Employee

1. The payment was Jan so it counts in 2025 for payment. The classes beginning in 2025 was fine, if the payment had arrived in 2024.

2. The IRS allows you to claim the money paid the best way for you. Your dollars paid for a lot of things! The IRS has a great brochure that explains how scholarships and tax credits interact. You get to choose how you claim your dollars are used.

3. We will do some of the math here and the rest in the program. They key is to have a sheet with your taxes so you can explain it later, if you need to.

4. I will get you started. It is not lying to say you used the 529 for room and board, even if the money went directly to the college. That just freed up other dollars to use on room and board. The IRS understands paying the school from the 529 is easy and that kids have to live somewhere.

5. As long as your room and board expenses match up with the school, there is no issue. You will want to keep the rental agreement with your tax records, or some sort of proof - Venmo works for proof.

Let's deal with the issue at hand.

Let's start with the 1099-Q - it can towards room and board first. See 529 for Room and Board. If all of it can be used as room and board, tuck it away. If there is a little left over, subtract it from tuition paid.

Next, more to the scholarship - cover the rest of tuition and necessary /required items. See Qualified Education Expenses - Internal Revenue Service as you may have deductible expenses like a computer or internet -maybe not.

Is all the money used up? Normally it is and nothing is taxable income. If it is not all used up, then the remainder is income to the student and is added to her taxable income.

The hard part, any scholarship income that remains, is considered unearned income for the kiddie tax, see What is the Kiddie Tax? If the numbers are small enough, you won't need to do anything. But, just in case, that's the last possible hurdle.

This was a lot of information so take it step by step. Best wishes!

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