Hal_Al
Level 15

Get your taxes done using TurboTax

Scholarship + ESA distribution + 529 Distribution = $79,063 which is $10,596 more than your expenses (50,991 +600 = 16,876= 68,467).  Plus, you want to allocate $4000 of tuition for the AOC. Something has to be taxable. You have to decide what.  TurboTax cannot handle this without you knowing how to enter it.  You may want to consider having you tax return done professionally.

 

That said, it can be done.  Here's how I would do it.  First have the student report $12,950 of taxable scholarship on his return (I conclude the scholarship is not restricted since it was applied to the overall bill).

His standard deduction will wipe that out, so none is taxable.*

 

Then decide whether to report the ESA distribution or the 529 distribution.  To do that you need to calculate the earnings portion of the$14,722 ESA distribution**. The ESA administrator may be able to help . You will not enter the 1099-Q that will result in the most tax and only enter the other one.  You will use $4000 of tuition to claim the AOC.  I quick calculate that only   $1646*** of the distribution will be non qualified. So, for the 529 distribution: 1646 / 27886 = 5.9%.  0.059 x 12,826 =$757 taxable income. You do a similar calculation for the ESA distribution (1646/ 14,722 = 11.2% x earnings). It's probably not going to make much difference. 

 

 

*scholarship is treated as earned income for purposes of the standard deduction calculation for dependents. 

 

**TurboTax can do this on the 1099-Q worksheet. You need your basis and account value as of 12-31-22. 

 

***14,722 +27866 - [68,467 - 4000 -(36,455-12,950)] = 1646

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