Where do I enter education expenses other than tuition for my student, to avoid paying tax on a 529 distribution? Neither the 1099-Q section nor the 1098-T section has it

[emily]

I have entered a 1099-Q for a 529 distribution and there is a place in that section where it says I will enter education expenses for my student, but then all it asks is whether I used the money to pay a loan. I have also completed the 1098-T section but that only covers tuition and books and materials purchased from the school. I have not found a place to enter room and board expenses.

[Hal_Al]

There is a known glitch in TurboTax (TT). They are working on it (no announced fix date). 

[Hal_Al · Accepted solution]

The 1099-Q is  only an informational document. The numbers on it are not required to be entered onto your (or your student's) tax return. The interview is complicated and it's easy to make mistakes. Avoid it if you can and you can. 

You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) 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 (you don’t need it). You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. You also cannot count expenses that were paid by tax free scholarships.

References:

1. 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." 
2. IRS Pub 970 states: “Generally, distributions are tax free if they aren't more than the beneficiary's AQEE for the year. Don't report tax-free distributions (including qualifying rollovers) on your tax return”.
3. "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." 

[Pace99]

I did some further research and found that you do not have to enter / report 1099-Q if your total qualified expenses for that year cover the amounts you withdrew from your 529 plan.  So if this is the case, you can just delete your entry of the 1099-Q to avoid dealing with TT half-*** ability to support this feature.  Here is a quote from one financial website "If your withdrawals did not exceed your qualified expenses for the year, the 529 plan distributions are income tax free. If this is the case, the 1099-Q can just be kept with your other important tax documents.".  Definitely do your own research to confirm.

[snoqualmie7]

Thanks for your replies to this @Hal_Al!, especially the detail about filling the 1099-Q only necessary when the distribution is taxable...very helpful.

This is a very serious glitch in TurboTax: with no way to enter qualified educational expenses other than tuition, users who took distributions will be incorrectly taxed on those expenses. In my situation that amounted to THOUSANDS of dollars in incorrect taxes. Additionally, guidance from TurboTax explaining that filing of the 1099-Q is only required when the distribution is taxable (perhaps with a guided walkthrough) would be hugely helpful here.
Is there any way to report this to TurboTax?

[mmatrull]

It seems like TT struggles every year with getting the Education expense portion of the expenses correct.  I'm really not sure why its so difficult.  Last year, although the calculations were incorrect, there were spots to enter Room and Board, Books, Special Accommodations, etc.  Literally anything you could use 529 funds to cover.  This year I seem to be able to find Required Books and Other Books and that's it.  But it only comes up sometimes when I walk through the Education Expense section 15+ times. Terrible job TT...terrible.  With the AI capabilities available now your software seems to be less and less helpful which is mind boggling.

[dddccc111]

@Hal_Al - How do you know TT is fixing this?  This is a serious bug.   TT is considering all my 529 earnings as taxable because there is no way to enter Room and Board expenses, which are eligible under 529s.  If someone did not know better and was trusting Turbo Tax the difference could be thousands.  Is there any ETA for a fix.

[Prescott100]

Many thanks for that. I've been pulling my hair out trying to figure out why Turbotax is showing a qualified 529 distribution as taxable.

[Hal_Al]

Q. How do you know TT is fixing this? 

A. I'm in contact with the forum moderator. 

Q. Is there any ETA for a fix?

A. Not that they've shared, yet. 

[Nounours]

Could we please have an update on this issue?

Seems like everyone with 529 distributions and living off campus will be blocked from filing until this gets solved. At the very least, it would be nice if TurboTax blocks that section until it is fixed, like it was a couple of weeks ago.

Thank you.

[MarilynG1]

If you enter the 1099-Q first in the Income section of TurboTax, when you get to the Education section, you will have an entry box for Room & Board.

If the 1099-Q was used for Room & Board and other qualified education expenses, however, you don't need to enter it in your return.  If your 1098-T has a larger amount in Box 1 than Box 5, you may qualify for an Education Credit and will want to enter the 1098-T in your return.

Here's more detailed info Form 1099-Q, and Form 1098-T.

@Nounours 

[user17707051987]

I had a non qualified distribution in the amount of the scholarship. And I had some qualified expenses which were covered by qualified distribution in addition to the tuition payment covered by the qualified distribution. Given that, my understanding in that I have to find space to fill in details, is it correct? I am not sure I can just not file given that I have a non qualified distribution (even though it is reflective of the scholarship from the same year).

A few people suggested going into Forms. I am using Online version - is it correct that you can not go in Forms view using Online version?

Thank you

[ThomasM125]

It is true you cannot use the forms mode if using the online TurboTax product. However, when you enter your Form 1098-T you are asked to enter qualifying education expenses such as tuition, books and required fees. If you enter the Form 1099-Q before you enter your Form 1098-T you will be asked for your room and board expenses (in the 1098-T section) that would be allowed as a deduction to determine if the income from your education savings plan is taxable, and to what extent. So it seems you just need to complete the Form 1099-Q and 1098-T sections in TurboTax to account for your ESA distribution and education expenses.

[emily]

There is no place to enter a 1099-Q in the income section 

[AmyC]

Correct, it is entered in the education section which is under deductions and credits. However, you only want to enter the 1099-Q if you have an excess distribution that is taxable.