Room and board deduction for college paid with a 529

[leone-movich]

Paid for college room and board with 529 plan.  Do I enter that amount under Education Expenses/Room and Board section

[Hal_Al · Accepted solution]

Yes. First enter the 1099-Q, under 529 distributions. Then enter educational expenses, at the ed expense section, including room & Board. TurboTax will apply it to the 529 distribution.

To get the screen to enter Room & Board, answer yes when asked if you have book expenses.

If you also intend to claim a tuition credit, see more detail below on how to coordinate the two tax benefits.

[lisawolfe]

This would be helpful if Turbotax was actually working this way, which it is not (in Home & Business).  It's charging us tax on the room & board portion of the 529 distribution. (appears to be a bug, as I've checked everything, and my investment adviser looked at the worksheets and saw that it wasn't accounting for room & board properly)

[slocheltreejr]

I had the same problem but was able to get it to work by insuring the program recognized the student was at least 1/2 time.  This required deleting a 1098T for a summer school class at the community college where he was not.  Box 8 must be checked - it then accepted my input for room and board under the QHEE 529 column.

[Hwood33]

What is the fix for this bug?  I have the identical problem - amount used from 529 used and entered for room and board is being treated as income in Home and Business.

[Hal_Al]

There is no bug. Part of your expenses paid have been used to calculate the tuition credit or were offset by tax free scholarships. You cannot count the same expenses, you used for those, to claim an exclusion of the 529 plan earnings.

Total qualified expenses (including room & board) less amounts paid by scholarship less amounts used to claim the Tuition credit equals the amount you can use to claim the earnings exclusion on the 1099-Q.
Example:
  $10,000 in educational expenses(including room & board)
   -$3000 paid by tax free scholarship
   -$4000 used to claim the American Opportunity credit
 =$3000 Can be used against the 1099-Q

Box 1 of the 1099-Q is $5000
Box 2 is $600
3000/5000=60% of the earnings are tax free
60%x600= $360
You have $240 of taxable income (600-360)

See the worksheets, TT prepares:
-Student Info Worksheet
-1099-Q worksheet

[Hwood33]

The return does not include any amount for the American Opportunity credit, and there are no free scholarship amounts either.

[Hal_Al]

Go through the education section again. When you get to the screen that says “Here’s your Education Summary”.  Click edit next to “Education Information”. When you get to the screen titled “Amount Used to Calculate Education Deduction or Credit”, verify the amount you want to use or change it.

If that doesn't work, you can delete the 1099-Q and 1098-T and start over. If the 1099-Q goes on your return (because you are the recipient), enter it before you enter the 1098-T. The interview process goes smoother.  Enter at Deductions & Credits/Education/ ESA and 529 Qualified Tuition Programs (or type> 1099-Q <in the search box).

Note that the qualified expenses have to be more than the box 1 amount on the 1099-Q, not just more than the box 2 amount.

[Hwood33]

That worked, along with including ALL of my expenses.  Thanks.

[lisawolfe60]

There is a bug, my CPA investment adviser who's been in the business over 30yrs and is current on tax law, has many clients who have 529's, proved it to me by using different software in comparison.  Turbotax is not properly accounting for 529.  It counted 100% of my 529 withdrawal as income, deducted no expenses, and I triple checked entries (which were entered in right places).  Look at the forums, they have numerous people posting about how Turbotax is confusing what education expenses are qualified/deductible with the oppty credit (these are not the same thing) and not offsetting 529 withdrawal income properly vs. qualified education expenses deductions (which are ALL expenses, tuition, room&board, books, institution required fees for attending).  When very experienced CPA's are showing you how the software isn't calculating properly and others in forums are saying the same thing, there is something wrong with the software.

[lisawolfe60]

here's the link to someone who identified how to fix it

<a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/2007009-how-do-i-force-turbotax-to-correclty-apply-room-and-board-...>

[mkz666]

how do I get a refund for the fee I paid for Turbo Tax since it is not working properly and allowing a room and board deduction?

[tmlust]

Unfortunately while Turbo Tax still states Room & Board is deductible if paid by 529 (2018 taxes); however, as the owner of the 529 account paying tuition and room and board with the 529 on my dependent daughters behalf, I am unable to enter any Room and Board information - only Tuition and Books. Is this part of the tax law change?

[Hal_Al]

No. The new tax law did not change that.
To get the screen to enter Room & Board, answer yes when asked if you have book expenses. The R&B screen will come up after books.

Alternately, if the distribution, from the qualified tuition plan, was totally spent on qualified educational expenses, you do not need to report the 1099-Q as income. So, just don't enter the 1099-Q into TurboTax. When TT determines that none of it is taxable, there is no entry made anywhere on the IRS tax forms. The only paper work is a 1099-Q worksheet that is not sent to the IRS, but might come in handy if you are audited

[tmlust]

I was able to enter room and board on my children’s personal taxes, but not on my individual taxes as I have in the past. This clearly reduces the education credits I received as a parent paying for my child’s college education. In previous years.

Additionally, the only place to enter College expenses (1098-Q) is on my dependent child’s taxes, not on mine as the parent of said dependent. As such I am restricted to only enter the 1098-T information and book expense in turbo tax as the parent there is no option for Room & Board on the parents taxes, only on the dependent child’s taxes where to 1098-Q is entered.

It’s interesting as my dependent child is told they cannot claim certain educational deductions as they are being claimed as a dependent on a parents taxes, but then things like room & board cannot be entered by the parent.

I have attempted what you recommend, but even then the only way to enter room and board is to manually enter it on the 8863 (?) form and it makes no difference. Turbo tax does NOT provide the option when I (as a parent) select books and expenses to include room & board. At least not in the 2018 tax version.

Granted the change in tax law has greatly increased my tax liability. My refund has been reduced by 66% with the removal of things like Unreimbursed employee expenses and the fact that my tax rate was reduced throughout the year so less tax was withheld initially.

That said, based on turbo taxes algorithms and my inability to enter room & board expenses, my educational credits have dropped from over $7k to $325 this year. AND this year I had 3 at the University of Delaware compare to 2 the previous tax year.

Talk about s kick in the teeth. Either I’ve missed something or the government is milking the middle class or turbo tax missed something. I tend to lean towards the latter two.