Q. If I only withdraw $3000 from my son's 529 plan, there should be no tax on the earnings. I will have to file my tax return to claim for AOTC, and my son has to file his tax return for 1099-Q even though he doesn't have any income. Is that right?
A. Yes, you would file for the AOTC, on your return. Your son could enter the 1099-Q in TT, but shouldn't. It just risks mistakes. 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. 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."
Q.. Also, I would like to confirm that non-qualified education expenses from a 529 account are expenses such as transportation, personal and miscellaneous expenses.
A. Food and housing are qualified personal expenses, for a 529. But not transportation, clothing entertainment and other personal stuff.
Q. I would assume that tuition surcharge by some colleges is counted as tuition.
A. Yes, as would computers and software used for school.
