Why is my 529 distribution being taxed? I report $3,400 in earnings on the 1099-Q. I report $16,000 in tuition on the 1098-T.

[KrisD]

What was the total distribution?

[Anita01]

When you go through the education credits section for the 1098-T, you're asked how much of the expenses you want to allocate to the credits.  If you choose nothing there, all the expenses are allocated to being used for the education credits.  Return to education expenses (Enter education expenses in the Find window on the upper right, hit enter, then the Jump To.    This time don't allocate more than $4,000 to the credits, that will maximize the credits and leave the balance of expenses to make your distribution nontaxable.