I have entered the amount from 1099Q and high school and grade school tuition (exceed the distribution), but it is still showing a taxable amount - why?

[Hal_Al]

You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including K-12 tuition, to cover the distribution.  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.

On form 1099-Q, instructions to the recipient reads: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution." 

[sfmike]

My understanding is that the distribution when used for high school tuition is non-taxable for federal taxes , but not in my state (CA). When I enter the 1099Q info in TurboTax it raised my federal taxes. How do I get it included in the state calculation but not the federal one?

[AmyC]

The program should exempt the federal portion allowed and move to the state. Federally, p to $10,000 is not taxed. Any amount over that is taxable. You must enter what it was used for and enter the expenses. If all of it was used on qualified expenses, it does not have to be entered at the federal level.

@sfmike 

[sfmike]

Yes - thanks. I just hadn't gotten further through the Q&A where it prompted me to enter the educational expenses. Works as expected.