Q. I was asked to choose a number for the large education credit and I am confused on what to enter and how to enter an accurate number?
A. It's trying to help you allocate expenses between the 529 distribution and the Tuition credit, for the best result because you don't have enough expenses for both. But you do have enough expenses, if you add room & board. Read on for how to handle this.
"The student is the recipient on the 1099-q but the parent ss# is on the form. "
That can't be, unless the plan registration is wrong. But , it won't matter. You won't be entering the 1099-Q.
You don't say how much room and board you had or what the school's allowance for attendance is. But it doesn't matter. Based, on your other numbers, your R&B is bound to be enough that the the 1099-Q is not taxable.
Delete the 1099-Q.
You can just not report the 1099-Q, at all, if the 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. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit (we've done that).
References:
- 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."
- 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”.
Also delete the 1098-T to clear the old background calcs. Go through the entire education interview until you reach a screen titled "Your Education Expenses Summary". Click delete next to the student's name. You'll then get the "Your Education Expenses Summary" screen again. Click the "Add a student" button. Re-enter the 1098-T. Without the 1099-Q, it will give you the maximum credit and not ask that confusing "larger credit" question.
I assume "attending more than half-time" means less than full time. A full time unmarried student, under age 24, even if you don't qualify as a dependent, is only eligible for the refundable portion of the American Opportunity Credit (AOTC) if he supports himself by working (unless he's an orphan). You cannot be supporting yourself on parental support, 529 plans or student loans & grants. It is usually best if the parent claims that credit.
