"If the distribution was to you, and you are not claiming your son as your dependent, then it's not a qualified distribution. It's fully taxable to you."
That statement is not true. Your son does not need to be your dependent, he only needs to be the beneficiary of the 529 plan.
"On which tax return does the 1099-Q and 1098-T go on? His or mine?"
For 529 plans, there is an “owner” (usually the parent), and a “beneficiary” (usually the student dependent). The "recipient" of the distribution can be either the owner or the beneficiary depending on who the money was sent to. When the money goes directly from the Qualified Tuition Plan (QTP) to the school, the student is the "recipient". The distribution will be reported on IRS form 1099-Q.
The 1099-Q gets reported on the recipient's return.** The recipient's name & SS# will be on the 1099-Q.
The 1098-T goes on your son's return. BUT, you and your son have to coordinate the educational expenses. You can claim the tuition paid, for the 1098-Q, but he cannot claim the same expenses that you claim, to claim a tuition credit. Example:
Example:
$10,000 in educational expenses(including room & board)
-$3000 paid by tax free scholarship
-$4000 used to claim the American Opportunity credit (on your son's return)
=$3000 Can be used against the 1099-Q ( on your return)
Box 1 of the 1099-Q is $5000
Box 2 is $600
3000/5000=60% of the earnings are tax free
60%x600= $360
You have $240 of taxable income (600-360)
**Alternatively; 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. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. Again, you cannot double dip! 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, in case of an IRS inquiry.
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."
