I've read a lot of the posts on this topic but I'm still confused.
We disbursed $$ from a 529 Plan to pay for QEE but TT is telling me my son needs to report additional $ as income and my state taxes went up after I entered the disbursed amount with $0 not used for QEE.
Why?!?!
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By QEE, I am assuming you mean Qualified Education Expenses. Did you enter the 1098-T so the 529 expenses could have something to attach to?
Here's how to get to the 1098-T screen if you haven't visited the Education section yet:
From the Education Expenses Summary screen you can:
Some important tips about entering this form:
There are three things you can do with your Qualified educational expenses (QEE):
TurboTax allocates QEE, in that order, until you tell it otherwise.
If you know you have enough QEE, for all three, You can just not report the 1099-Q, at all. 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."
You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. You also cannot count expenses that were paid by tax free scholarships. You cannot double dip!
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