Education expenses

Forum|Forum|2 years ago
February 28, 2024
2 replies
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Hi. I received a 1099-Q form, listing distributions that I took from a 529 account to pay for education-expenses for my daughters - both are in college and my dependents.

The form lists

1. Gross distribution

2. Earnings

3. Basis

and then states that the recipient is not the designated beneficiary. My question is:

DO i need to enter this form into my tax declaration even if all the distributions were used for qualified college expenses??? When I entered the form in my declaration, it triggered additional tax money to pay although these distributions should NOT be taxable. Can you clarify this?

Best answer by AmyC

No, do not enter it. If you enter the form, the program assumes you have a tax liability and starts looking since it should not be entered if there is not a tax liability.

IRS Publication 970, Tax Benefits for Education states:

If the entire 1099-Q went to qualified expenses, room and board, tuition, etc then you do not need to enter the form. Tuition paid for the first 3 months of the next year also qualify, see page 12, What Expenses Qualify, and page 52 for qualified distributions.

It becomes more emphatic on Page 45: Don't report tax-free distributions (including qualifying rollovers) on your tax return.

AmyCAnswer

Level 15

No, do not enter it. If you enter the form, the program assumes you have a tax liability and starts looking since it should not be entered if there is not a tax liability.

IRS Publication 970, Tax Benefits for Education states:

It becomes more emphatic on Page 45: Don't report tax-free distributions (including qualifying rollovers) on your tax return.

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Hal_Al

Level 15

You said "I received **a** 1099-Q form, listing distributions that I took from **a**529 account to pay for education-expenses for my daughters - both are in college and my dependents."

That seems to indicate that you took money from a single 529 plan account and used it to pay expenses for two different students. You can't do that. The part of the distribution that paid expenses for the 2nd daughter (the one who isn't the beneficiary of the account) is a non qualified distribution.

"You may use a single 529 plan account to save for more than one child if you, as the account owner, change the beneficiary when it's time to pay for your next child's college expenses."

https://www.savingforcollege.com/article/pros-and-cons-of-separate-529-plans-for-two-or-more-children#:~:text=You%20may%20use%20a%20single,college%20expenses%20%E2%80%94%20at%20no%20cost.

rmorelloAuthor

Level 2

Ah! I did not know that a single 529 college fund can only have one beneficiary. What is the easiest solution to this? Generate a different account for the second daughter OR indicate that the existing account has 2 beneficiaries?

What it recommended?

Thanks