Q. What happens when despite adding the expenses and1098-T on the parents return we are phased out due to income and nothing gets reported for education expenses, credits or eligibility for Lifetime learning credit? Does that cause an issue on his return if he is reporting 1099-Q?
A. No. Since no expenses are being used for either the American Opportunity Credit or the Lifetime learning credit, there are more expenses available for the 1099-Q. So, it's even less likely the 529 distribution is taxable. And, if it is, the taxable amount will be even smaller.
