What is TT's definition of "military academy," as it uses the term in its software? This is an important question for two separate tax situations pertaining to 529 plans.
1. The 10% penalty on Withdrawals. 26 USC 529(c)(6) provides that the 10% penalty in section 530 applies to withdrawals not used for qualifying expenses. Section 530(d)(4)(B)(iv) provides an exception, however, for beneficiaries who "at the United States Military Academy, the United States Naval Academy, the United States Air Force Academy, the United States Coast Guard Academy, or the United States Merchant Marine Academy, ...). The law lists the academies, and does not use the phrase "military academy." TT does not appear to recognize that the US Merchant Marine Academy is NOT a military academy because my tax goes UP improperly if I do not check the box relating attendance at a "military academy."
2. USMMA is a US Service Academy that Accepts Aid. Students at USMMA do not get paid for attendance, and do have fees for books, materials, etc. USMMA charges some fees, is on the DoED list of qualifying institutions, and does participate in aid programs. Military academies do not. USMAA does not charge "tuition," however, so it does not issue the 1098-T. Unfortunately, TT does not allow me to treat the books and fees portion of my 1099-Q as a tax exempt withdrawal, i.e., it is treating USMMA as thought it were a "military academy" that does not participate in DoED financial aid programs.
This needs to be corrected in the software. Not all US Gov't service academies are "military academies," but I suspect that there is a logic error based on the erroneous and ambiguous term "military academy."
