Correction on the statement made by @KrisD15. The 1099-Q is not reported on the parents' return unless the 1099-Q is issued to the parent. The 1099-Q (if it needs to be reported) must be reported on the return of the recipient of the 1099-Q. Whose name and social security number appear on the return? That is the return, if required, the 1099-Q should be entered.
The 1099-Q does not have to be reported on the return if the distribution was used for qualified educational expenses. A 1099-Q only needs to be reported if there is an excess. To determine if there is an excess, add up the tuition from the 1098-T plus the room and board and the books and other required material for the course. Then from this amount subtract any scholarships/grants in Box 5 of the 1098-T. If the difference is equal to or more than the 1099-Q. If not, you do not have to report the 1099-Q. If there is a difference then the excess is reported in other income (Line 8z of Schedule 1).
The 1098-T cannot be used to report the on the parent's return unless there is excess tuition after applying subtracting Box 5 from Box 1. Room and board is not a part of the education credit calculation but is a part of the calculation for determining the taxability of the 529 calculation. If the remaining tuition is more than the amount on the 1099-Q less the room and board, books, and other required course material, then a tuition credit may be claimed on the excess. Tuition (Box 1) - Scholarship/Grants (Box 5) = Amount claimed for education credit. Add to the eligible tuition the room and board, books, and required course material, is this amount more than the amount reported on the 1099-Q. If so the amount of tuition above the amount reported on the 1099-Q is eligible to be claimed. For example: Tuition = $15,000 - Scholarships/Grants = $5,000 = $10,000 remaining Tuition. Remaining Tuition $10,000 + Room & Board, etc. = $14,000 = Total 1099-Q eligible = $24,000. 1099-Q amount = $18,000 less the 1099-Q eligible amount = $24,000 ($18,000 - $24,000 = $6,000 of available tuition for education credit).
