in Education
1492127
My daughter is a college student. We claim her as a dependent. We entered her 1098T and 1099Q on our tax return. I am guessing she has a taxable amount because some of the funds from her 529 plan paid for off campus housing. Either way, it shows on our return the recipient has a taxable amount of $170 for purposes of regular tax and $64 for purposes of 10% additional tax. Where do I enter this info onto her tax return? I assume I answer no to the education questions regarding the 1098T and 1099Q since we already entered those on our return. I am lost as to how to get this information onto her return and where it actually should go.
Thank you.
You'll need to sign in or create an account to connect with an expert.
For your daughter's return, you do not need to enter the 1098-T, simply the taxable scholarship income. Follow these steps:
Thank you. Based on the information in my original question, would I enter the $170 using the steps you gave me and then do it again entering the $64 or is the $64 already part of the $170 figure?
For 529 plans, there is an “owner” (usually the parent), and a “beneficiary” (usually the student dependent). The "recipient" of the distribution can be either the owner or the beneficiary depending on who the money was sent to. When the money goes directly from the Qualified Tuition Plan (QTP) to the school, the student is the "recipient". The distribution will be reported on IRS form 1099-Q.
The 1099-Q gets reported on the recipient's return. The recipient's name & SS# will be on the 1099-Q.
If you are the recipient, TT should have already entered these amounts on your return, The $170 will be on line 8 of Schedule 1 and the $64 on form 5329. You don't enter it on her return too.
If she is the recipient; you delete the 1099-Q from your return and go thru the whole process again on her return.
But, those may not be the correct numbers. Read on for more.
_______________________________________________________________________________
Qualified Tuition Plans (QTP 529 Plans)
It’s complicated.
For 529 plans, there is an “owner” (usually the parent), and a “beneficiary” (usually the student dependent). The "recipient" of the distribution can be either the owner or the beneficiary depending on who the money was sent to. When the money goes directly from the Qualified Tuition Plan (QTP) to the school, the student is the "recipient". The distribution will be reported on IRS form 1099-Q.
The 1099-Q gets reported on the recipient's return.** The recipient's name & SS# will be on the 1099-Q.
Even though the 1099-Q is going on the student's return, the 1098-T should go on the parent's return, so you can claim the education credit. You can do this because he is your dependent.
You can and should claim the tuition credit before claiming the 529 plan earnings exclusion. The educational expenses he claims for the 1099-Q should be reduced by the amount of educational expenses you claim for the credit.
But be aware, you can not double dip. You cannot count the same tuition money, for the tuition credit, that gets him an exclusion from the taxability of the earnings (interest) on the 529 plan. Since the credit is more generous; use as much of the tuition as is needed for the credit and the rest for the interest exclusion. Another special rule allows you to claim the tuition credit even though it was "his" money that paid the tuition.
In addition, there is another rule that says the 10% penalty is waived if he was unable to cover the 529 plan withdrawal with educational expenses either because he got scholarships or the expenses were used (by him or the parents) to claim the credits. He'll have to pay tax on the earnings, at his lower tax rate (subject to the “kiddie tax”), but not the penalty.
Total qualified expenses (including room & board) less amounts paid by scholarship less amounts used to claim the Tuition credit equals the amount you can use to claim the earnings exclusion on the 1099-Q.
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 (usually on the student’s return)
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.
" I am guessing she has a taxable amount because some of the funds from her 529 plan paid for off campus housing".
No. Room and board, even off campus living (even living at home) are qualified expenses for a 529 plan distribution*. You may use the lower of your actual costs or the school's allowance for on campus students.
*If she had used scholarships for housing, some of the scholarship would be taxable. But the rules for 529 plan money is different.
I'm a graduate student, over 24, nobody can claim me as a dependent. The number in box 1 is over $4000 greater than the number in box 5 (the number in box 6 is $0.00. Box 7 and the box for at least half-time student are checked. Box 3 is blank and boxes 4 & 10 are $0.00
However, whereas I get a deduction of $4000, all of the income in box 7 is treated as income in my 1040. How come, I thought the grants and scholarships for tuition, books and other qualified expenses were not taxable.
Any help would be appreciated (I'm using turbo premier)
Still have questions?
Questions are answered within a few hours on average.
Post a Question*Must create login to post
Ask questions and learn more about your taxes and finances.
anonymouse1
Level 5
in Education
currib
New Member
ir63
Level 2
rgrahovec55
New Member
Cindy10
New Member