Q. I made a withdraw to pay the enrollment fee for my son's college in Fall '24. This was the first time I made a withdraw and I deposited it into my bank account and then paid the school from my account (the exact amount). Is this a taxable event since it was paid to me and do I need to report it?
A. No, because the student has sufficient educational expenses to offset the distribution.
Q. I rolled three 529 accounts over from one state plan (VA) to another state plan (CA) and received three 1099Q forms. Do I need to report these?
A. No. A rollover is also a qualified distribution.
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 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. You cannot double dip!
References:
- 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."
- 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”.
