Q> Do I use the information from the 1099Q and the 1098T on his taxes to keep him from paying taxes on the 1099Q withdrawal?
A> Simple answer: yes. Even though you used the 1098-T, on your tax return, to claim the education credit or deduction, it can be entered again on the student-dependent's return to calculate the taxable portion of the 1099-Q.
You say " to keep him from paying taxes on the 1099Q withdrawal". That indicates that you already know none of it is taxable. In that is the case, just don't enter any educational info on the student's tax return.
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 cannot count expenses, that you used to claim the credit or deduction. You also cannot count expenses that were paid by tax free scholarships. You cannot double dip!
On form 1099-Q, instructions to the recipient reads: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution."
