New Jersey. It includes the 529 as income when the 1099-Q is included in the federal information.
My 529 distribution is qualified (unless the education credit applies which is affected by my traditional IRA contribution putting me over or under the income limit for that credit). I don't want to 'double dip'.
I ran 6 different scenarios; with various different combinations of 1099-Q (included or not), Traditional IRA (max contribution or not); adjusting the taxable earnings on the 1099-Q when the education credit applied and then partial IRA contributions just under the limit to qualify for the education credit.
Turbo Tax does not change the taxable earnings on the 1099-Q for the scenarios in which it is input exactly. I tried to apply the $2,500 education credit to the taxable earnings but box 1&3 needed to change and I don't want that to be a red flag with the IRS. So I messed around with my IRA contributions to try to get to the income limit to a point where the answer is close to what I think it should be.
It seems that Turbo Tax should have been able to adjust that box 2 information accordingly knowing the education expenses that I had and whether I was eligible for the education credit?
