529 qualified distributions

[jan6]

I paid for room and board from a 529 plan distribution, which should be a qualified expense, yet Turbotax deems it to be an excess distribution taxable in my hands (I am the recipient, my daughter is the beneficiary).  Turbotax seems to only allow the tuition expense specified in the 1098-T as a legitimate expense.  I tried to fix this manually in the Student Information Worksheet Part VI Education Expenses line 17 Adjustment in the 529 column, but it cannot be edited.  How and where do I need to amend my tax return so that Turbotax will recognize room and board paid from a 529 plan as a qualified expense?

[levisncap89]

Room and board expenses are only qualified up to the amount the institution includes in its cost of attendance figures for financial aid purposes. Anything spent on room and board in excess of that figure is a non-qualifying distribution. Did it not ask you about that figure?

[jan6]

No.  I did not get any question on the "cost of attendance for financial aid purposes".  Where would it ask for that?

[levisncap89]

Basic question: on your 1099-Q, is there anything in the blank below boxes 5 & 6?

[jan6]

Do you mean Distribution Code?  It is 1.

[jan6]

So, I can just delete all the 1099-Q forms - are you sure?

[jan6]

Wow - thanks that solved the problem!!

[levisncap89]

Yes. It works like this: Qualified expenses (you calculate), minus Pell grants, minus tax free scholarships & other untaxed assistance = adjusted qualified expenses. As long as your withdrawal is less than your AQE, you're golden. No need to enter the form at all.

[jan6]

This would imply that the 1098-T forms are superfluous as well?

[levisncap89]

No, You definitely want to enter the 1098-T. It is the basis for calculating potential education credits. What will happen is that, in the course of entering your educational expenses data, the withdrawal from your ESA will go in there as other tax-free assistance. It's not taxable income, but it does reduce your qualifying expenses for the purpose of calculating potential credits.

[jan6]

OK. Thank you very much

[levisncap89 · Accepted solution]

Yes. 1 = a regular distribution. It presumes that all of the withdrawal was utilized for qualified expenses. In that instance, you don't need to enter the 1099-Q at all as long as your withdrawal was 100% utilized to pay for your adjusted qualified expenses