I withdrew funds from a 529 account but did not use them for educational expenses. Where do I report the 10% penalty for non-qualified expenses?

[KrisD15]

Enter the Form 1099-Q you should have gotten and follow the interview. 

You will report that "No, it was not used for education, it was used for something else". The TurboTax program will apply any penalty tax due.  

The 1099-Q can be entered one of two ways, under 

• Deductions & Credits
• Education 
• ESA and 529 Distributions (Form 1099-Q) 

START 

OR

• Wages & Income
• Less Common Income
• Miscellaneous Income, 1099-A, 1099-C
• START
• ESA and 529 Distributions (Form 1099-Q) 

START

[Hal_Al]

TurboTax (TT) adds the 10% penalty automatically when you indicate that the distribution (withdrawal) was non-qualified.  The penalty amount appears on line 23 of form 1040 (from line 8 of schedule 2), separately from the calculated income tax on line 16. 

The 10% penalty (and the separate income tax, if any) is on the earnings portion of the distribution (box2 of the 1099-Q), not the full distribution (box 1 of the 1099-Q).