College Education Expense

[dac458]

I have a 1098T showing I paid $10,600 in expense box 1 for my son college   I have a 1099Q from 529 plan showing I had $ 9,150 paid to me the dad.  In the worksheet for the regular tax it drastically reduces my expenses from 10,600 to like 600 as qualified expenses.   Thus making the prorata earnings portion of the 529 distribution taxable income to me.  Why?   My son's expense way exceed the reimbursement withdrawals I made from the 529 account set up for his benefit.

[NCperson · Accepted solution]

here is how it works:

a) assuming there is NO scholarship in Box 5, $4000 of the expense is used to claim the $2500 of AOTC credit.

b) that leaves $6,600 of qualified expenses. 

c) how much was Room and Board, Books not in Box 1 of Form 1098T and computer related expenses.  Add that to the $6600

d) if b) plus c) exceeds $9150, the earnings Form 1099Q is Box 2 is NOT taxable  And there is no requirement to report it to the IRS.  If you look at the 1099Q instructions it states: 

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.

if this is the case, just delete the 1099Q from TT, put this documentation in a drawer in case the IRS comes knocking.  

[Hal_Al]

It sounds like TT used $10,000 (10,600 - 10,000 = 600), instead of $4000.

Go through the entire education interview until you reach a screen titled "Your Education Expenses Summary".  Click edit next to the student's name. That should take you to a screen “Here’s your Education Summary”.  Click edit next to “Education Information”. When you get to the screen titled “Amount Used to Calculate Education Deduction or Credit”, verify the amount you want to use or change it.