Do you need to report 1098-Q f used to pay qualifi...
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Do you need to report 1098-Q f used to pay qualified education expense?

 
3 Replies
Employee Tax Expert

Do you need to report 1098-Q f used to pay qualified education expense?

See the following TurboTax FAQ for information on reporting a Form 1099-Q:  Where do I enter a 1099-Q?

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Level 15

Do you need to report 1098-Q f used to pay qualified education expense?

as long as you have determined that your qualified expenses exceed Box 1, then no, there is no need to report. 

 

you have the obligation to figure that out.

 

on the instructions to the form 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.

Level 15

Do you need to report 1098-Q f used to pay qualified education expense?

Simple answer: No.

But, you cannot "double dip".  You cannot count the same tuition money, for the tuition credit,  that gets you (or your student) an exclusion from the taxability of the earnings (interest) on the 529 plan. Since the credit is more generous; you may want to use as much of the tuition as is needed for the credit and the rest for the interest exclusion.  Some of the distribution may end up taxable. 

 

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!  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, in case of an IRS inquiry.

 

 ***Another alternative is have the student report some of his scholarship as taxable income, to free up some expenses for the 1099-Q and/or tuition credit.

 

 

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