If you are the recipient (your name and your SSN on the 1099-Q form), you need to report it on your return even if it is used 100% for qualified education expenses. Did you (or your dependent) also receive a 1098-T form? Enter it on your return as well if you are claiming your student as a dependent.
For the future year, you can make a direct payment to the college instead of withdrawing the funds and then paying to the college. In this way, your student will be considered as the recipient and you won't enter it on your return.
After entering your 1099-Q form, make sure to enter expenses and scholarships to let TurboTax know that you have qualified expenses:
- Open or continue your return
- Click Show more next to Education under the Deductions & Credits section
- Click on Start/Revisit next to Expenses and Scholarships (1098-T)
- Follow the screens to enter your information about the school and the amount paid.
The earnings should not be taxable after you enter the qualified education expenses. But sometimes you might be better off by paying some taxes on the earnings and claiming the American Opportunity Tax Credit if you qualify (the credit is worth $2,500).
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