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mepeap
New Member

Question regarding 1099-Q Coverdale and 529

We have two Coverdale ESA accounts which we emptied in 2018 for education expenses for our son the beneficiary. I entered the distribution numbers for each in Turbo Tax. The forms had no earnings or basis information provided. Which, from what I read is ok to not complete in Turbo Tax. They do have a fair market value from the end of the year which is about 30-45% of the distribution which seemed odd as we did not add to these accounts during the year. Turbo Tax indicates these are tax free. 

When I added the information for our 529 Wisconsin EdVest distribution (also used for 100% qualified education expenses) Turbo Tax indicates the earnings portion is taxable. The sum of the ESA and 529 distributions are less than half our 1098-T statement of qualified education expenses . The net balance in the account at the end of the year Why would the earnings be taxable? Is it possible I'm answering a qualifying question wrong?

It says the student beneficiary must claim this amount as taxable. If the parents are claiming all the qualified student expenses - how and where would the student claim this amount?

Thank you

 

7 Replies
maglib
Level 10

Question regarding 1099-Q Coverdale and 529

Go back throught the education interview.  there is a question about the amount you want to use for education tax credits....  reduce the number from 10k.... 

The reason this number is editable is there are often times when creating a portion taxable, may be beneficial.... it can create an ability for the parent to claim an education tax credit and only enough income to the student where they will owe no taxes or less taxes then the parents can get credited.... you need to play around to get the best bang for the buck.  (Note the earned income for the student is also considered kiddie taxable, it also can qualify to allow the student to open an IRA..., lots of reasons why you may want this number to stay at $10k).

It is up to you to play with taxable to the student vs. tax credits to you and what works best. And yes, the IRS does allow this.

After you edit that number, continue and make sure you check to maximize my education credits.

**I don't work for TT. Just trying to help. All the best.
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mepeap
New Member

Question regarding 1099-Q Coverdale and 529

Thank you, however I'm not sure where in the education interview there is a question for education tax credits- it does not present that to me when using the "walking though everything option"
maglib
Level 10

Question regarding 1099-Q Coverdale and 529

It says you are using windows desktop version.  Go to the DEDUCTIONS & CREDITS tab. SCROLL down to EDUCATION and select "VISIT ALL"
**I don't work for TT. Just trying to help. All the best.
***Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
mepeap
New Member

Question regarding 1099-Q Coverdale and 529

Yes using Windows Desktop, Deluxe; Understand how to get to VISIT ALL in that section; I'm not seeing that screen and based on your answer I'm seeing reports of this topics being a known 529/1098-T Turbo Tax glitch. Is it possible an updated version of the software is why its not showing up? I've also read a recommendation to simply not enter the 529 info- your thoughts? Thank you again.
mepeap
New Member

Question regarding 1099-Q Coverdale and 529

Ok- I've now found it, and by lowering the number it reduces the taxable part. can you explain why lowering the number reduces the taxable part?
maglib
Level 10

Question regarding 1099-Q Coverdale and 529

The amount your entering is the amount of education expenses that can be used for education credits on your personal return....  since the AOTC only credits up to  $4k in education expenses and the LLC is up to $2k, you can reduce this number to $4k or less and see how it impacts your return, and then see how making income taxable to the student would impact them.  Many actually want their students to have income so they can open IRA's or as long as their rate is lower than the amoun of the education credit earned by the parent.
**I don't work for TT. Just trying to help. All the best.
***Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
mepeap
New Member

Question regarding 1099-Q Coverdale and 529

Thank you
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