Contributions to a Coverdell ESA are not deductible on your federal tax return. Distributions are not included in income if used for qualified education expenses.
If you do have education expenses, try following these steps to receive exempt distributions reported on your 1099-Q. If you do not have education expenses then your interest is taxable.
When entering education expenses enter your 1099-Q first. Then enter ALL education expenses in the 1098-T section in TurboTax. This includes tuition, books, room & board, supplies, and fees.
As long as the education expenses (after grants or scholarships are deducted) are equal to or more than the 1099-Q total distribution, then there will not be a tax implication.
