I received a 1099Q for my daughter from a 529 plan that was set up by her grandfather, who is the custodian of the account. My daughter is the listed beneficiary of the account and is dependent on my taxes. There was a distribution made for her first semester of college paid directly to the university and was for 100% of all related tuition and fees. My understanding of these ESA Coverdall/529 plans is that as long as they are used for the education expenses of the beneficiary then there are no federal taxes due on that distributed monies. However when I input the 1099-Q into her tax return, Turbotax is showing she owes ~$400. How do we correct for this, or is my understanding not correct on the distributions?
