Scholarship distribution from 529

[Cornell42697]

I paid tuition for my daughter and then requested reimbursement from her 529 plan in December 2024.  She received a $1,000 scholarship which offset her tuition for fall 2024 ($500) and spring 2025 ($500). I pulled the extra $1,000 out of the 529 plan and sent the scholarship amount to her while I got reimbursed for the remainder (about 30K) We earn too much to qualify for AOTC. How do I move this $1,000 expense to her return so she pays the taxes on it at her rate. This is my first time doing this.

Thanks.

[KrisD15]

Please clarify, your daughter is the student and she had how much tuition expense? 

1,000 scholarship which was paid to the school when? Was the spring 2025 tuition paid in 2024 or 2025? 

Are you saying you got reimbursed from the 529 of about 30,000? Does that mean tuition was 31,000? 

Does the student have Form 1098-T for tax year 2024 and if yes, what is reported in Box 1 and Box 5? 

Was Form 1099-Q issued under your social security number? 

[Hal_Al · Accepted solution]

Q.  How do I move this $1,000 expense to her return so she pays the taxes on it at her rate? This is my first time doing this.

A. You can't do that now (after the fact).  Since the distribution was sent to you, you are the recipient and any taxable portion, goes on your tax return. Next time, have to money sent to her.

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, when it  needs to be reported. The recipient's name & SS# will be on the 1099-Q.  Distributions fully covered by expenses do not need to be reported. 

The $1000 distribution (box 1 of the 1099-Q) is not the taxable amount.  The taxable amount is the earnings portion of the distribution (box 2 of the 1099-Q). Even though the scholarship went to her, you can still claim the "scholarship exception" to the 10% penalty. 

[cornell042697]

The distribution of $1,000 from the 529 plan was sent directly to her. I think because we didn't qualify for the AOTC (only due to roth conversion in the same year), we couldn't pass the taxable income down to her.

[Hal_Al]

In one place you say "I pulled the extra $1,000 out of the 529 plan". In another place you say "The distribution of $1,000 from the 529 plan was sent directly to her".

If the distribution went to her, so did the 1099-Q.  See above for what do do with that.  That negates the question "How do I move this $1,000 expense to her return?"