Deduction for Student Room and Board Paid w/529 Plan

[BaliThai]

Turbo Tax states that generally room and board for university students is not deductible - unless it is paid with a Coverdell ESA or 529 plan distribution. In our case, I paid for some of my daughter's housing costs from a 529 plan. I can't figure out where to enter it in TT.

As background, she shows $30 payments for qualified tuition, etc. on one 1098-T from community college, and $12,971 on another 1098-T from her university. The second 1098-T also shows $11,099 in scholarships that all went toward tuition. I received a 1099-Q showing me as recipient for her (she had a required computer purchase for online classes, and her housing required a credit card for initial payments) with a gross distribution of $6,683. 

I found where I could enter the cost of her required computer, but not where to enter her housing costs. This is very confusing! I recall from previous years with my older daughter there was a place to enter all kinds of university expenses - some qualified and some not, but it was easier to know where to put things.

Can someone help me know what I do here? Thank you!

[Hal_Al]

To get the screen to enter Room & Board, answer yes when asked if you have book expenses.

But, better yet, 

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. 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. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. 

References:

1. 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." 
2. IRS Pub 970 states: “Generally, distributions are tax free if they aren't more than the beneficiary's AQEE for the year. Don't report tax-free distributions (including qualifying rollovers) on your tax return”.

[Hal_Al]

If you are eligible for a tuition credit (your income is not too high), 

There is a tax “loop hole” available to claim an education credit, for the parents of students on scholarship. The student reports all his scholarship, up to the amount needed to claim the American Opportunity Credit (AOC), as income on his return. That way, the parents  (or himself, if he is not a dependent) can claim the tuition credit on their return. They can do this because that much tuition was no longer paid by "tax free" scholarship.  You cannot do this  if the conditions of the grant are that it be used to pay for qualified expenses.

Using an example: Student has $10,000 in box 5 of the 1098-T and $8000 in box 1. At first glance he/she has $2000 of taxable income and nobody can claim the American opportunity credit. But if she reports $6000 as income on her return, the parents can claim $4000 of qualified expenses on their return.

Books and computers are also qualifying expenses for the AOC. So, extending the example, the student had another $1000 in expenses for those course materials, paid out of pocket. She would only need to report $5000 of taxable scholarship income, instead of $6000.

The IRS actually encourages use of this technique. From the form 1040 instructions: “You may be able to increase an education credit if the student chooses to include all or part of a Pell grant or certain other scholarships or fellowships in income. For more information, see Pub. 970, the instructions for Form 1040 and IRS.gov/EdCredit".  PUB 970 even has examples of how to do the “loop hole”.

[BaliThai]

Thank you. This is helpful. I do wish TT said that instead of a cryptic statement about room and board only being deductible if paid by Coverdell ESA or 529 plan . . . but thank you for your super timely help!