Recipient of 529 distribution (1099-Q) unable to get expenses in Turbotax to offset tax on these distribution

[ChristianP113]

The qualified education expenses entered in Turbotax don't offset my tax on 529 distributions and don't show up education expense deduction listing.  Please advise how to resolve this.  Note my income doesn't allow for me to take the tuition tax credit.

[AmyC]

Your income isn't allowing you into the section so let's look at our options:

• If the entire 529 was used towards 529 qualified Room and Board  and Qualified Education Expenses - Internal Revenue Service, then the form is not entered. Delete it.
• If there is a taxable distribution, be sure you enter only the taxable portion. Use Pub 970 to determine the taxable portion.

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.

 Pub 970 states:

The taxable portion is the amount of the excess distribution that represents earnings that have accumulated tax free in the account. Figure the taxable portion for 2024 as shown in the following steps.

1. Multiply the total amount distributed by a fraction. The numerator (top part) is the basis (contributions not previously distributed) at the end of 2023, plus total contributions for 2024, and the denominator (bottom part) is the value (balance) of the account at the end of 2024 plus the amount distributed during 2024.
2. Subtract the amount figured in (1) from the total amount distributed during 2024. The result is the amount of earnings included in the distribution(s).
3. Multiply the amount of earnings figured in (2) by a fraction. The numerator (top part) is the AQEE paid during 2024, and the denominator (bottom part) is the total amount distributed during 2024.
4. Subtract the amount figured in (3) from the amount figured in (2). The result is the amount the beneficiary must include in income.