If you or the spouse are the beneficiary, then you want to enter the 1099-Q on your tax return:
- Enter the 1099-Q in Federal > Deductions & Credits > Education > ESA and 529 qualified tuition programs. Begin by selecting the student for whom you made the withdrawal.
- Make sure that a distribution code is selected only if one is on your form. Leave it blank if there is not one.
- Answer the questions on the Death or Disability, Distribution Transfer, and Refund of Education Expenses screens.
- After you return to Form 1099-Q Summary screen, hit Done. On What level of school did you attend in 2021? enter the correct one.
- If the withdrawal was for attendance at elementary or secondary schools, you will be able to enter the expenses here
If not, you must enter them in the 1098-T section:
- Select Start/Revisit next to Federal > Deductions & Credits > Education > Expenses and Scholarships (1098-T)
- Select Edit next to the student's name.
- Click Edit next to Other Education Expenses (for all schools)
- Enter your qualified expenses here
- Return to the Here's your education summary screen and press Continue.
Whatever was not used for qualified education expenses, the earnings portion will be taxable as ordinary income. You will also be penalized for 10% of the earnings as an additional tax from an education account.
