Q. And there is zero impact on my taxable income. So I think I'm good!
A. Yes.
Q. I'm just surprised that the IRS doesn't require you to report this information?
A. Excellent observation. We've seen numerous posts, in this forum, where users have gotten notices from the IRS that coulda been handled by by an IRS form, for this situation. Because you went thru the effort, you will have the TurboTax worksheet to send to the IRS if you get a notice.
As to the dependent issue, you haven't mentioned your daughter's income.
There are two types of dependents, "Qualifying Children"(QC) and Other ("Qualifying Relative" in IRS parlance even though they don't have to actually be related). She cannot be a QC because she is over 23.
A person can still be a Qualifying relative dependent, if not a Qualifying Child, if he meets the 6 tests for claiming a dependent:
- Closely Related OR live with the taxpayer ALL year
- His/her gross taxable income for the year must be less than $4400 (2022).
- The taxpayer must have provided more than 1/2 his support. As mentioned earlier, 529 money is counted as support from the owner, not the beneficiary.
- He must be a US citizen or resident of the US, Canada or Mexico
- He must not file a joint return with his spouse or be claiming a dependent of his own
- He must not be the qualifying child of another taxpayer
The Other dependent (qualifying relative) credit is worth (up to) $500 per dependent and is non-refundable.
The IRS has a worksheet that can be used to help with the support calculation. See: http://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf
You also don't mention if your daughter will be claiming a tuition credit. If she does, she may have to make some adjustments to how she allocates the expenses for her 1099-Q. But, you should still be good on your tax return.
