529 disbursement is being taxed as income, even though I have qualifying education expenses (tuition, room , board etc)

[KrisD · Accepted solution]

Please enter the 1099-Q FIRST, and then the 1098-T, as well as all other education expenses.

Be aware that the program my ask if you want to apply any of the expenses to an education credit FIRST, which could result in taxable income on the earnings of the 1099-Q.

A credit is usually more advantageous than the tax on the earnings, especially if the earnings are taxed at the student's rate.

Also, remember the distribution can be applied to things like room and board, unlike the education credits.

Please pay attention to the order you enter the forms, and if you are offered an education credit.

Click the link below for great examples from the IRS on how you can maximize the credit.

CLICK HERE for IRS Pub 970 Tax Benefits for Education