Questions for Hal_Al or others who know the answers (see below):
We (parents) also took a distribution after my son graduated, cashing out the 529 account. The distribution was not used for college expenses.
Notes:
The 1099-Q has my name as the recipient.
- Gross distribution = $88K (Box 1)
- Earnings = $36K (Box 2)
- Basis = $52K (Box 3)
The 1098-T has my son's name as the recipient.
- Payments = $9670 (Box 1)
- Scholarships = $3700 (Box 5)
Questions:
1) Given the information above, are we eligible to reduce taxes by including the scholarship amount shown?
2) Can you be more specific regarding "A few screens later" and where exactly to enter expenses? After the "Who's the Student" screen and selecting "Someone else not listed here", I get the following:
(1) "Who's the the Student these expenses were paid for?" => entered my son's name
(2) "1099-Q Information" (reflects the information and boxes from the 1099-Q) => no changes or place to enter expenses.
(3) "State Tuition Plan" => chose 'Nevada'
(4) "Death or Disability" => chose 'no' and 'no'
(5) "Distribution Transfer" => 'no'
(6) "Refund of Education Expenses" => 'no'
(end) Returns to "Form 1099-Q Summary" screen
3) Regarding the Earnings shown in Box 2 of the 1099-Q, why is this taxed as 'income' and not included in Capital Gains since this is from investment income? For example, if my investments had a net loss of -$50K in 2022, why wouldn't the $36k in earnings be included with the -$50k for net loss of -$14K? It seems odd that TT counts it as separate 'income'.
Thanks.
