DawnC
Expert Alumni

After you file

Don't report it on either one of your tax returns - it is not taxable.   

 

If you know that the distributions from the 529 plan are not taxable because they were used on qualified expenses, do not enter the 1099-Q forms.  For most qualified education program beneficiaries, the amounts reported on the 1099-Q aren’t reported on a tax return.   Keep the form and associated education expenses with your tax records.

 

Amounts can be withdrawn to pay principal or interest on a designated beneficiary's or their sibling's student loan. The amount of distributions for loan repayments of any individual is limited to $10,000 lifetime.   Interest paid with these funds doesn't qualify for the student loan interest deduction.   See IRS Topic 313

 

Room and board usually isn't considered a qualified education expense for the purpose of education credits.  The one exception is if room and board was paid for with a Coverdell ESA or 529 plan distribution. In that case, the cost can be deducted from the taxable part of the plan's distribution.

 

1099-Q Guide

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