1099T 1099Q 529 Final full distribution

[user17761154992]

I claim my child who graduated in Spring 25 as a dependent since I pay all the tuition and finances.  I tried to distribute all of 529 toward tuition for spring semester, which was the final graduation semester, but 529 would only transfer certain amount leaving a small balance in account.  I paid the rest of the tuition using my bank account. My child received both the 1098T and the 1099Q. My child is filing their own tax form as a dependent. 

I have questions about who enters what and why the software isn't asking all the questions needed to calculate taxes.  I have had to go in thru the forms to input information.   

1. I will enter the 1098T as usual, but do I answer YES to did you receive 1099Q? My child received the form not me but I should enter it on my taxes same as I do the 1098T?

2. So will my child enter either of the forms on their taxes?

3. Where and how do I enter this if the software isn't asking me questions.

4. Do I deduct the amount on the 1099Q from the tuition amount paid to the school on the 1098T? If so then where? 

5. What do I do with the $214.47 from the 1099Q in box 2?  Is this the amount they wouldn't transfer so we had them send a check directly to us so it could be used for tuition? That amount is less than the tuition amount I paid thru the bank. 

6. 1098T has 250.00 in box 6.  Only thing I can think of is the internship required students to park in a garage and they all had to submit the receipts to be reimbursed.  It is listed on the college billpay as CNS TRVL STP.  What am I supposed to do with it? 

Thank you for any help.  This has been a very upsetting twist and complication. 

[Hal_Al]

Q I will enter the 1098T as usual, right?

A. Yes, if you are claiming the AOTC and have not already claimed it 4 previous times.

Q. Do I answer YES to did you receive 1099Q?

A. No, since you were not the "recipient" (your child received the form). 

Q. So will my child enter either of the forms on their taxes?

A. Probably not, it depends on the numbers.

Provide the following info for more specific help:

• Are you the student or parent.
• Is the  student  the parent's dependent.
• Box 1 of the 1098-T
• box 5 of the 1098-T
• Any other scholarships not shown in box 5
• Does box 5 include any of the 529/ESA plan payments (it should not)
• Is any of the Scholarship restricted; i.e. it must be used for tuition
• Box 1 of the 1099-Q
• Box 2 of the 1099-Q
• Who’s name and SS# are on the 1099-Q, parent or student (who’s the “recipient”)?
• Room & board paid. If student lives off campus, what is school's R&B on campus charge. If he lives at home, the school’s R&B “allowance for cost of attendance” for student living with parents.
• Other qualified expenses not included in box 1 of the 1098-T, e.g. books & computers
• How much taxable income does the student have, from what sources
• Are you trying to claim the tuition credit (are you eligible)?
• Is the student an undergrad or grad student?
• Is the student a degree candidate attending school half time or more?

[user17761154992]

Thank you. Here's the answers.

I did use the AOC 4 times starting Fall 2021 since I did receive 1098T. So now I think I have to use the Lifetime one. Does that change things significantly?  Perhaps I made a mistake using it the first year, but receiving the 1098T for 2021 prompted that.  The tuition on that form was only for the fall 2021 and didn't include any of tuition paid in 2022.

I am the parent

Student is my dependent

1098T Box 1     6,204.5

             Box 5     0.00 zero

No scholarships

1098Q Box 1    2,810.00

               Box 2     214.47

Student's name and ss# are on the 1098Q

Not sure what the room and board allowance was for off campus.  Estimated cost of room and board was perhaps estimated at 10,000 for on campus.  Here is the estimated info from the college

Live With parent housing, cable & phone$1,620

With parent food plan $2,790

Books and supplies$1,250

Transportation$3,058

Personal costs$1,200. 

The spring session 2025 Senior year student commuted from home where we paid all expenses.

We weren't claiming books and etc.

Student income from 3 jobs including internship after graduation 28500

Yes trying to get a tuition credit probably the LLC. Lifetime Credit

Student was undergrad Jan-May 2025 Graduated May 25

Student was full time student 

Thank you

[Hal_Al]

Your room and board, alone, is enough to cover the 529 distribution (1099-Q). It is totally tax free and does not need to be entered on either the parent or student's return.*

You should enter the 1098-T only on your return and TT will apply all the tuition ($6205) to the LLC. $6205 x 20% = $1241. Books and other course materials do not qualify for the LLC.  But they do go toward the 1099-Q.

*The 1099-Q is  only an informational document. The numbers on it are not required to be entered onto your (or your student's) tax return. The interview is complicated and it's easy to make mistakes. Avoid it if you can and you  can. 

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 don’t need it). 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.

References:

1. 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." 
2. IRS Pub 970 states: “Generally, distributions are tax free if they aren't more than the beneficiary's AQEE for the year. Don't report tax-free distributions (including qualifying rollovers) on your tax return”.
3. "IRS Publication 970, Tax Benefits for Education states: If the entire 1099-Q went to qualified expenses, room and board, tuition, etc; then, you do not need to enter the form." 

[user17761154992]

Ok.  So I don't have to deduct the 2800 distributed from the 529 to the school from the tuition paid 6204.00? 

My confusion increased when I looked at 8863 the adjusted qualified education expenses Worksheet page 9.

1. Total qualified education expenses paid for or on behalf of the student in 2025 for the academic period 

2. Less adjustments:    a. Tax-free educational assistance received in 2025 allocable to the academic period . . .
                                         b. Tax-free educational assistance received in 2026 (and before you file your 2025 tax 

                                              return) allocable to the academic period . . .
                                          c. Refunds of qualified education expenses paid in 2025 if the refund is received in

                                               2025 or in 2026 before you file your 2025 tax return . . . . . . . . . . . .
3. Total adjustments (add lines 2a, 2b, and 2c) . . . . . . . . . . . . . . . . . . . . . . . .
4. Adjusted qualified education expenses. Subtract line 3 from line 1. If zero or less, enter -0- . . . . . . .

Enter this on line 31

It makes sense not entering the 1098Q but I want to be clear that I don't reduce the 6204 by the 2800.  If I don't deduct it is it like double dipping some have called it? 

and this is confusing as well from 8863.  Makes it sound like somewhere somehow but TT not doing it, I need to deduct that 2800.

From form directions 8863 page 4 and 5 Adjusted Qualified Education Expenses.....
For each student, reduce the qualified education
expenses paid in 2025 by or on behalf of that student
under the following rules. The result is the amount of
adjusted qualified education expenses for each student.
Tax-free educational assistance.

For tax-free educational assistance received in 2025, reduce the
qualified education expenses for each academic period by
the amount of tax-free educational assistance allocable to
that academic period. See Academic period, earlier.
Tax-free educational assistance includes:
1. The tax-free part of any scholarship or fellowship
grant (including Pell grants);
2. The tax-free part of any employer-provided
educational assistance;
3. Veterans’ educational assistance; and
4. Any other educational assistance that is excludable
from gross income (tax free), other than as a gift, bequest, devise, or inheritance

It all

[Hal_Al]

Q. So I don't have to deduct the 2800 distributed from the 529 to the school from the tuition paid 6204.00? 

A. That is correct. At tax filing time, it does not matter what funds were actually used to pay which expenses. You are allowed to allocate expenses for the best tax outcome. 

Your situation is actually simple.  You allocate your room and board and books and supplies to the 529 plan and your tuition to the LLC, maximizing both tax breaks.  There's no double dipping. Tuition was used only for the tax credit and books and R&B only for the 529 distribution.  

All the gobbledygook  you described is all the more reason not to enter the 1099-Q.  It's complicated because of the various scenarios TT may need to handle. 

Transportation and personal cost are not qualified for any education tax break.