529 for High School and Dual Enrollment

[brianallen]

While working through the educational expenses, I had troubles with high school and college expenses flowing correctly.  My child took a class as dual enrollment class and as well as her regular high school.

The high school expense is the allowed $10000 and the dual enrollment class is $690 and books $155 with a scholarship of $350.  The college expense is then $495

The “Student Information Worksheet” has the high school tuition expense cover correctly, but the dual enrollment class is flag as an excess distribution of $495.  Under the “For Purpose of Regular Tax” column, the Adjusted Qualified High Education Expenses are zero.  

I am guessing that I answered a question incorrectly and it is causing the college expenses to be not allowed or something else.

Any suggestions would be appreciated.

[KrisD15]

A student is not considered a "college student" until after they graduate from High School. 

The expenses for the "college courses" would PROBABLY be considered as High School expenses.

Were the payments made to the high school or to the college directly? 

If the college considered the student to be a college student, and therefore the expenses as college expenses, the payments would be reported on Form 1098-T. 

I suggest you contact the college for clarification, but I assume the TurboTax program will see only 10,000 as a non-taxable distribution for a student that has not yet graduated from High School.

According to the IRS:

“Qualified Elementary and Secondary Education Expenses

These are expenses for no more than $10,000 of tuition, incurred by a designated beneficiary, in connection with enrollment or attendance at an eligible elementary or secondary school.”

”Example 3. During the 2023 fall semester, Larry was a

high school student who took classes on a half-time basis

at College X. Larry wasn't enrolled as part of a degree program at College X because College X only admits students to a degree program if they have a high school diploma or equivalent. Because Larry wasn't enrolled in a

degree program at College X during 2023, Larry wasn't an

eligible student for tax year 2023.”

[brianallen]

The college did provide a 1098-T, which included the qualified tuition expenses ($690) and the scholarship amounts ($350).  Given it was a single class, the half-time student was not checked on the 1098-T.

[Hal_Al]

Yes, the $495 qualifies as a qualified  distribution over the $10,000 allowed for high school. This is because the course is post secondary even if the student isn't.

I don't know that TurboTax is able to handle your situation.  Try entering the $495 as a separate distribution. Enter one 1099-Q for $10K  and a 2nd 1099-Q for the $495.  That way you can assign H.S. expenses to one and college expenses to the other.

Better yet, just don't enter the 1099-Q (delete what you have entered). 

You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses 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. 

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”.