How do you input 529 tax-free withdrawals to pay student loans?

[Chrisgmitchell]

Under the recent tax law changes, you can make 529 withdrawals for student loan payments.   As I understand it, this was retroactive back to any such payments made since 12/31/2018.   I made such loan payments in 2019 out of the 529 account I have set up for my daughter for some small older student loans she had.  At the time I thought I would have to pay tax and penalty on those payments but now I should not have to.  Problem is my daughter (non-dependent now) was not enrolled anywhere in 2019.   We got the 1099-Q from the 529 administrator but I don't see where I can enter these non-taxable withdrawals anywhere in Turbo Tax.   There is one input screen that asks you whether you took a tax-free distribution from a 529 plan for payments toward a qualified education loan.  I answered "yes".  But then it never asked me about the amount details.   So right now Turbo Tax is treating the earnings portion of the withdrawal as entirely taxable when I don't think it should be.   Any one have any guidance on this one?

[Hal_Al]

You can just not report the 1099-Q, at all, if your student loan payment was $10,000 or less. When the box 1 amount on form 1099-Q is fully covered, TurboTax will enter nothing about the 1099-Q on the actual tax forms. 

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 may withdraw up to $10,000 from their plan to pay down qualified student loans penalty-free—with conditions. The first is that the $10,000 maximum is a lifetime limit for a beneficiary and each sibling.  Secondly, plan holders cannot claim any student loan interest deductions paid with this money.

[baxterjames96]

Hi - I have both qualified education expenses and qualified loan repayments made from a 529 in 2021.  I can not figure out how to get Turbo tax to not make me pay tax on the qualified loan repayment.  No matter what I try, the loan amount will not show up on page 3, line 2a of the 1099-Q worksheet and thus Turbo tax is making me pay unnecessary tax.

Please help me!

[Hal_Al]

There are two places in TurboTax (TT) where you encounter that question.  One in the 1099-Q section and one in the 1098-T.  You don't mention if you saw those. Go thru both interviews again (10990-Q first).  If you don't see em, delete the 1099-Q and 1098-T and start over.  

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[bl275]

This isn't covered in the TurboTax interview. I entered mine in TurboTax Premier 2024 by using View > Forms > Form 1099-Q  > under the section Qualified Tuition Program (QTP) > Line 2a Qualified Loan Payments, right-click > override > enter you loan payments up to $10,000 lifetime.  Oh so easy peasy 😉. 

[KrisD15]

It is in the interview after entering the 1099-Q under "Education" in the Deductions and Credits section. 

Be sure to enter the Student Loan Interest Paid first, which is also under Deductions and Credits

[scoobycoder]

Hero, thanks

This isn't covered in the TurboTax interview. I entered mine in TurboTax Premier 2024 by using View > Forms > Form 1099-Q  > under the section Qualified Tuition Program (QTP) > Line 2a Qualified Loan Payments, right-click > override > enter you loan payments up to $10,000 lifetime.  Oh so easy peasy 

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‎January 23, 2025 11:02 AM