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Conflicting info how to treat 1099Q and 1098T. have 1099Q for parent and another for daughter. which tax return gets what? do I split the 1098T?

 
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1 Best answer

Accepted Solutions
Hal_Al
Level 15

Conflicting info how to treat 1099Q and 1098T. have 1099Q for parent and another for daughter. which tax return gets what? do I split the 1098T?

For 529 plans, there is an “owner” (usually the parent), and a “beneficiary” (usually the student dependent). The "recipient" of the distribution can be either the owner or the beneficiary depending on who the money was sent to. When the money goes directly from the Qualified Tuition Plan (QTP) to the school, the student is the "recipient". The distribution will be reported on IRS form 1099-Q. 
The 1099-Q gets reported on the recipient's return. The recipient's name & SS# will be on the 1099-Q.

If you have two 1099-Q, one in your name and one in the student's name; then you each report one on your own return.**

Even though one of  the 1099-Q is going on the student's return, the 1098-T should go on the parent's return, so you can claim the education credit. You can do this because he/she is your dependent.

You can and should claim the tuition credit before claiming the 529 plan earnings exclusion. The educational expenses he claims for the 1099-Q should be reduced by the amount of educational expenses you claim for the credit.
But be aware, you can not double dip. You cannot count the same tuition money, for the tuition credit,  that gets him and you an exclusion from the taxability of the earnings (interest) on the QTP. Since the credit is more generous; use as much of the tuition as is needed for the credit and the rest for the interest exclusion. Since you have two 1099-Q, you should use the rest of the expenses against you 1099-Q first, assuming you are in a hugher tax bracket than your student. Any expenses left over would be used on her return.

Total qualified expenses (including room & board) less amounts paid by scholarship less amounts used to claim the Tuition credit equals the amount you can use to claim the earnings exclusion on the 1099-Q. 

Example:
  $10,000 in educational expenses(including room & board)

   -$3000 paid by tax free scholarship

   -$4000 used to claim the American Opportunity credit

 =$3000 Can be used against the 1099-Q 

Box 1 of the 1099-Q is $5000

Box 2 is $600

3000/5000=60% of the earnings are tax free

60%x600= $360

You have $240 of taxable income (600-360) 

**Alternatively; 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. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. Again, you cannot double dip!

View solution in original post

6 Replies
Hal_Al
Level 15

Conflicting info how to treat 1099Q and 1098T. have 1099Q for parent and another for daughter. which tax return gets what? do I split the 1098T?

For 529 plans, there is an “owner” (usually the parent), and a “beneficiary” (usually the student dependent). The "recipient" of the distribution can be either the owner or the beneficiary depending on who the money was sent to. When the money goes directly from the Qualified Tuition Plan (QTP) to the school, the student is the "recipient". The distribution will be reported on IRS form 1099-Q. 
The 1099-Q gets reported on the recipient's return. The recipient's name & SS# will be on the 1099-Q.

If you have two 1099-Q, one in your name and one in the student's name; then you each report one on your own return.**

Even though one of  the 1099-Q is going on the student's return, the 1098-T should go on the parent's return, so you can claim the education credit. You can do this because he/she is your dependent.

You can and should claim the tuition credit before claiming the 529 plan earnings exclusion. The educational expenses he claims for the 1099-Q should be reduced by the amount of educational expenses you claim for the credit.
But be aware, you can not double dip. You cannot count the same tuition money, for the tuition credit,  that gets him and you an exclusion from the taxability of the earnings (interest) on the QTP. Since the credit is more generous; use as much of the tuition as is needed for the credit and the rest for the interest exclusion. Since you have two 1099-Q, you should use the rest of the expenses against you 1099-Q first, assuming you are in a hugher tax bracket than your student. Any expenses left over would be used on her return.

Total qualified expenses (including room & board) less amounts paid by scholarship less amounts used to claim the Tuition credit equals the amount you can use to claim the earnings exclusion on the 1099-Q. 

Example:
  $10,000 in educational expenses(including room & board)

   -$3000 paid by tax free scholarship

   -$4000 used to claim the American Opportunity credit

 =$3000 Can be used against the 1099-Q 

Box 1 of the 1099-Q is $5000

Box 2 is $600

3000/5000=60% of the earnings are tax free

60%x600= $360

You have $240 of taxable income (600-360) 

**Alternatively; 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. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. Again, you cannot double dip!

toolmantom2
Returning Member

Conflicting info how to treat 1099Q and 1098T. have 1099Q for parent and another for daughter. which tax return gets what? do I split the 1098T?

My son graduated in May, and started working June and will earn more than $40K from work that he started in end of June.  He was younger than 24.  Per IRS notes was considered full time student given the 5 months attending before graduation. 

We paid the Tuition and Room and Board while he was at school.

Like I had done in prior years, I had the 529 Distribution paid to me back in June after he graduated.

If I do not list him as a dependent, then it does not allow me to input Room and Board for his last semester as school.  I does allow for me to do for our younger Son who is listed as dependent.

Based on the difference the 1099Q now exceeds 529 Distribution exceed Tuition and Cost by $3,400 which is just Housing Cost, since I had not listed any other items.

Even if I as suggested put in 7 months, Turbo Tax does not seem to want to allow me to put in Room and Board cost for him. 

I am concern this is going create a mess for Taxes and tracking.  Why won't Turbo Tax seem to allow for the input of the Room Tax, when seems to be considered that if a Student graduates in May the spring semester cost including room etc can count?

 

 

 

 

Hal_Al
Level 15

Conflicting info how to treat 1099Q and 1098T. have 1099Q for parent and another for daughter. which tax return gets what? do I split the 1098T?

If the 529 distribution was fully covered by his room and board, just don't enter the 1099-Q. 

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. 

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." 

 

That said, if you still want to enter it, it's even easier, in TurboTax (TT), when the student is not your dependent. Enter the 1099-Q. When you tell TT that the student was someone you're not claiming ("someone else not listed here")*, it will give you a single screen to enter all the expenses, including Room & board. 

 

*It may be necessary to delete your son from the personal info/dependent section. 

Hal_Al
Level 15

Conflicting info how to treat 1099Q and 1098T. have 1099Q for parent and another for daughter. which tax return gets what? do I split the 1098T?

You didn't ask whether he can be your dependent or not. 

 

Graduation year 

If he/she was a student (under 24) for at least 5 months and lived with you for more than half the year, and did not provide more than 1/2 his own support for the whole year, you can still claim him. Be sure he knows you're claiming him, so he doesn't claim himself. He can only be claimed once. But, he can "file taxes" without claiming his own exemption.

The real question is who should be claiming him in this "transition" year to adulthood. You two have to agree on who is going to claim his exemption. Each should do their taxes both ways and see which way the family comes out best.  Even then, you have to meet the rules. The rule is that a child of a taxpayer can still be a “Qualifying Child” dependent, regardless of  his income, if:

  1. he is a full time student under 24 for at least 5 calendar months of the year (graduating in May usually means you meet the 5 month rule)
  2. he did not provide more than 1/2 his own support  (scholarships are considered 3rd party support and not support provided by the student). 
  3. lived with the parent (including time away at school) for more than half the year

 

So, it usually hinges on  "Did he provide more than 1/2 his own support in 2020.

The support value of the home you provided is the fair market rental value of the home plus utilities & other expenses divided by the number of occupants. IRS Publication 501 on page 20 has a worksheet that can be used to help with the support calculation. See: http://www.irs.gov/pub/irs-pdf/p501.pdf  (page 15)

toolmantom2
Returning Member

Conflicting info how to treat 1099Q and 1098T. have 1099Q for parent and another for daughter. which tax return gets what? do I split the 1098T?

Thank you on both responses.

I had originally gone through and put in for "someone else" an that is when I could not enter Room and Board.  I had skipped him and changed to not a dependent, put in 6 months support, so was not flagged a dependent but had not totally deleted his history.   

On the question of support, we had provided all his support while in School, when the 529 was paid out.  He though made enough $ in the last portion of the year that he ended up paying from there on in a higher rent Apartment then campus housing.

Given my income level, I don't seem to be benefiting from additional deductions, so was not really planning on claiming him as a dependent anyway.

I will take another look at clearing his info and see if that works.  Was also wondering if could hard code on form for Room and Board vs the through auto fill in.

I will be doing his taxes as well, so just trying to not mess it up.

Hal_Al
Level 15

Conflicting info how to treat 1099Q and 1098T. have 1099Q for parent and another for daughter. which tax return gets what? do I split the 1098T?

You cannot make entries directly on the tax forms with the online versions of TT.  You can with the download/CD versions.

 

I think you can make entries on the worksheets (I have download)  in both cases. 

 

 

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