I received a 1099-Q with my Tax ID even though my dependent son is the 529-plan beneficiary. I got this form because I paid my son's rent, but it raised my taxes. Why?

[ryansa2]

I had to receive the funds for my son's rent because I wasn't given an option by the 529-plan provider (MESP) to pay the apartment owners directly, so I acted as a middle-man of sorts.  But 100% of these funds went to pay what I believe are legitimate college expenses (i.e., ones for which I shouldn't be taxed if I use 529 funds to pay for them).  If so, how can I avoid seeing my 'federal tax amount due' increased in TurboTax?

[Fern]

As custodian of the account, a 1099 Q will be issued to you.  You will enter it in your tax return.  Make sure you have indicated who the student is on the screen titled Student – see screenshot below. If you are not claiming your son as a dependent in your tax return, you will have to enter information about the student on the next screen. You will also then enter the tuition and other expenses (including room and board) information.

If you are claiming your son as a dependent, select his name from the list of people in your tax return. Then you will enter his 1098 T information in the tab - Expenses and Scholarships (Form 1098-T). Room and board expenses are not eligible for education tax credit/deduction.  However, 529 disbursements can be used to cover room and board costs. This can be entered at Did _________ Pay for Books or Materials to Attend School? When your 529 disbursement exceeds your education expenses, this is one of the options.  See screenshot below.



To report the 1099 Q in Turbo Tax:

Select Federal Taxes
Select Deductions and Credits
Select Show More at Education
Select Start or Revisit at ESA and 529 qualified tuition programs (Form 1099-Q)

To enter a 1098 T in Turbo Tax:

Select Federal Taxes
Select Deductions and Credits
Select Show More at Education
Select Start or Revisit at Expenses and Scholarships (Form 1098T)