1099Q is coming up as income but it went directly to the university for tuition- my daughter did not use it for herself?

[MinhT1]

If tuition and other qualified education expenses (including books and equipment and room & board), but excluding any amount used to claim education credits or the tuition and fees deduction, are greater than your 1099-Q distributions, you are not required to report form 1099-Q on your tax return.

Just keep records of tuition and other expenses for at least three years.

@gracekathleenht   @NCperson  I have edited my answer.

Edited 03/18/2020  |  1:42 PM PST

[NCperson]

@MinhT1 -  your answer is a little misleading if the taxpayer took advantage of AOTC or had scholarship money

@gracekathleenht - please post the following and I can walk you through the math

1) 1098T Box 1 and Box 5

2) 1099Q Box 1 and Box 2

3) was the student a dependent of the parent? 

4) was the parent eligible for AOTC? 

[Carl]

Income is income, no matter who or what entity it's from, it that income is received by or used for the benefit of a tax payer or one of their dependents.

All scholarships, grants and 1099-Q distributions are reported as taxable income *INITIALLY*. It's taxability is offset by the qualified education expenses that income is used to pay for.

All scholarships, grants, 529 distributions, gifts from Aunt Mary, etc are all considered 3rd party income.  If the amount of 3rd party income received exceeds the amount of qualified education expenses, then it gets reported on the student's tax return and the student will pay taxes on the excess that was not used for qualified education expenses.

 First, scholarships & grants are applied to qualified education expenses. The only qualified expenses for scholarships and grants are tuition, books, and lab fees. that's it. If there is any excess, then it's taxable income to the student. It automatically gets transferred to and included in the total on line 7 of the 1040.

Next, 529/Coverdell funds reported on 1099-Q are applied to qualified education expenses. The qualified expenses for 1099-Q funds are tuition, books, lab fees, AND room & board. That's it. If there are any excess 1099-Q funds they are taxable to the student. The amount is included in the total on line 7..

Finally, out of pocket money is applied to qualified education expenses

When you have a 1099-Q it is extremely important that you work through the education section of the program in the order it is designed and intended to be used. If you do not, then there is a high probability that you will not be asked for room & board expenses, and you could therefore be TAXED on your 1099-Q funds.

Finally, if "all" qualified expenses are covered by scholarships, grants, 1099-Q funds and there is ANY of those funds left over, the left over excess is taxable. While the parent can still claim the student as a dependent, it is the student who will report all the education stuff on the student's tax return. That's because the STUDENT pays the taxes on any excess scholarships, grants and 1099-Q funds.