Daughter is 25 and non-dependent in school. 1099-Q withdrawals received by the parent used to pay Child's tuition. Who reports 1098-T?

[brantleydavis]

My daughter is not eligible to be the parent's dependent due to age 25. 529 withdrawals were made by parents for the benefit of paying child's tuition. Parents included 1099-Q on their return and reported tuition paid as an offset. Is this correct? Should 1098-T issued to the child be reported on either return?

[Hal_Al]

Q.  Should 1098-T issued to the child be reported on either return?

A. The 1098-T is only an informational document (as is the 1099-Q).  The numbers on it are not required to be entered onto anybody's  tax return. However receipt of a 1098-T frequently means you are either eligible for a tuition credit or possibly the student has taxable scholarship income. 

Q. Parents included 1099-Q on their return and reported tuition paid as an offset. Is this correct?

A. Probably not. The parents should first use room and board (R&B) to offset the distribution. The student may need the tuition, fees, books and a computer to claim the tuition credit and/or keep the scholarship tax free. R&B are not qualified expenses for the tuition credit or tax free scholarship.

There needs to be coordination between student and parents in allocating expenses, for tax purposes. It's even  possible that nothing gets entered on anybody's return. More info is needed.

Age, alone, does not disqualify you child from being your dependent. 

There are two types of dependents, "Qualifying Children"(QC) and Other ("Qualifying Relative" in IRS parlance even though they don't have to actually be related). There is no income limit for a QC but there is an age limit and student status test, a relationship test and a residence test. She is too old to be a QC.  A person can still be a Qualifying relative dependent, if not a Qualifying Child, if he meets the 6 tests for claiming a dependent:

1. Closely Related OR live with the taxpayer ALL year
2. His/her gross taxable income for the year must be less than $5050 for 2024.
3. The taxpayer must have provided more than 1/2 his support

In either case:

4. He must be a US citizen or resident of the US, Canada or Mexico
5. He must not file a joint return with his spouse or be claiming a dependent of his own
6. He must not be the qualifying child of another taxpayer

[brantleydavis]

Thank you so much for the reply.  Here is more information.   The child is living with the parents while attending school at a local college.  Child/student earned $7,500 working part-time at the college.   Based on your earlier reply this would mean the child/student does not qualify as a Qualifying Relative.   Also, the 1098-T includes some scholarship that reduced the tuition which was paid from the parent's withdrawal from the 529 plan.  I had assumed the withdrawal on form 1099-Q had to be reported on the parents tax return and would be offset by paying the tuition for the child.   Should I report the 1099-Q tuition payment withdrawal on the child/students tax return along with the 1098-T instead?      Thank you so much for helping me with this!

[Hal_Al]

Q.  Should I report the 1099-Q tuition payment withdrawal on the child/students tax return along with the 1098-T instead?  

A. No. Since the money went to you and the 1099-Q is in your name (you are the recipient), it cannot be entered  on her return.  It goes on your return or goes nowhere. 

Provide the following info for more specific help:

• Box 1 of the 1098-T
• box 5 of the 1098-T
• Any other scholarships not shown in box 5
• Does box 5 include any of the 529/ESA plan payments (it should not)
• Is any of the Scholarship restricted; i.e. it must be used for tuition
• Box 1 of the 1099-Q
• Box 2 of the 1099-Q
• Room & board paid. If student lives off campus, what is school's R&B on campus charge. If he lives at home, the school’s R&B “allowance for cost of attendance” for student living with parents.
• Other qualified expenses not included in box 1 of the 1098-T, e.g. books & computers
• Is the student an undergrad or grad student? If a grad student, did she complete her BS/BA before Jan 1, 2024. Has the American Opportunity Credit already been claimed 4 times before on her education (by her or you). 
• Is the student a degree candidate attending school half time or more?

[lls69]

question, is it all year or 8 months?  is higher education an exception to not living with the parent all year?

[SusanY1]

A student is considered full-time if they are in school at least five (5) months taking the course load considered full-time by the school.  A student temporarily away from home for the purposes of attending school is considered to have lived with the parent all year for purposes of determining dependncy. 

@lls69