You got a 1099-Q form in your name for the money you used to pay for the books and the deposit. Your daughter should have gotten a 2nd 1099-Q, in her name, for the money that went directly to the school. This is in addition to the 1098-T. The 1098-T comes from the school and does not replace or substitute for a 1099-Q from the 529 plan. They are two separate documents
Q. Are you saying that I should put in the 1098-T information in our taxes, even though it is in her name and even though it was paid with 529 money?
A. Yes. You should use $4000 of the tuition to claim the American Opportunity Credit (AOC). It is worth $2500 to you, unless your income is too high or too low.
Q. I should not bother with the deduction for the computer because the 1098-T would be a better deduction.
A. Yes, but not exactly. You get to count $4000 of the tuition toward the AOC But you get to count the computer cost for the 1099-Q (and room & board), even though you didn't directly pay for it with 529 money. It's not a "deduction", per se. It's a qualified expense for calculating the excludability of the 529 plan earnings.
Provide the following info for more specific help. I'll tell you how to enter everything. I suspect your daughter will still not have to file a tax return.
- Box 1 of the 1098-T
- box 5 of the 1098-T
- Does box 5 include any of the 529 plan payments (it should not)?
- Box 1 of each 1099-Q
- Box 2 of each 1098-Q
- Room & board paid. If she lives off campus (even at home), what is the school's R&B charge for on campus students
- Other qualified expenses not included in box 1 of the 1098-T, e.g. books & computers, tuition deposit (the deposit may already be included in box 1).
