$56,404 Tuition expenses
- 28,500 Paid by Scholarship
= 27,904 Expenses that can be used for the 1099-Q
$28,500 1099-Q (529 Withdrawal)
- 27,904 Expenses
$ 596 of the distribution in non qualified
Surely, you can come up with $596 of books, computers or room & board not covered by the other 529. In which case, you can omit entering both the 1099-Q and 1098-T on either your or her return.
Otherwise, 596 / 28500 = 2% of the earnings are taxable. 0.02 x 9996 = $209 Is your reportable income. We could use a workaround to enter that, but as I said earlier, technically you have to also submit form 5329 to claim the scholarship exception to the penalty. Entering it correctly is going to be messy. "TT is not great with college exps and 529s, sadly. "
