The TurboTax interview is complicated, as you now know. Just don't enter the 1099-Q, or delete it if you already entered it.
You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, including room & board (even if he lives at home) to cover the distribution. When the box 1 amount on form 1099-Q is fully covered by expenses, TurboTax will enter nothing about the 1099-Q on the actual tax forms. But, it will prepare a 1099-Q worksheet for your records. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit (if you were eligible). You also cannot count expenses that were paid by tax free scholarships.
References:
- On form 1099-Q, instructions to the recipient reads: "Nontaxable distributions from CESAs and QTPs are not required to be reported on your income tax return. You must determine the taxability of any distribution."
- IRS Pub 970 states: “Generally, distributions are tax free if they aren't more than the beneficiary's AQEE for the year. Don't report tax-free distributions (including qualifying rollovers) on your tax return”.
Q. Where can I enter room and board costs paid from a 529?
A. If you still want to enter it all, enter the 1099-Q first. Later in the educational expenses and scholarships section, you enter your expenses. To get the screen to enter Room & Board, answer yes when asked if you have book expenses.
