My son lived at home all year and was a full-time student. He had a GI Bill that paid tuition, but we had to use the 529 account money to help pay for the additional living expenses we incurred (room/board). I claimed him as a dependent on our return. He filed a return for the little bit of part time job earnings (claiming that he was a dependent on our return). Why are the 1099-Q earnings being taxed for me?
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Q. Why are the 1099-Q earnings being taxed for me?
A. You need to enter the offsetting room and board expenses.
But better yet, just delete the 1099-Q.
You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) 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!
References:
Be advised that you may use 529 money for home living expenses ("room & board") but you are limited to the lesser of your actual costs or the school’s R&B “allowance for cost of attendance” for student living with parents. The school should be able to provide you with that number.
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