Hal_Al
Level 15

Education

Q. So if you didn't use all of it for education expenses then you need to adjust the 1099-Q proportionately before entering it?

A. No.

You enter the1099-Q exactly as received.  Then you enter your expenses.  TurboTax will calculate the taxable portion of the 1099-Q.  It helps to have an idea of what that output will be.  Although, the entering of educational expenses is simpler for elementary and High school students than it is for college students. 


Example:
  $8,000 of qualified educational expenses

Box 1 of the 1099-Q is $10,000

Box 2 is $3000

8000/10,000=80% of the earnings are tax free; 20% are taxable

20% x $3000 = $600

You have $600 of taxable income  plus a 10% non qualified distribution penalty (10% x $600 = $60).  The income goes on line 8 of Schedule 1.  The penalty goes on line 8 of form 5329.