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Education
1. No, you are not offsetting the full amount. That is only if you have a taxable distribution. You stated earlier in the thread that all of the 1099-Q went to qualified expenses. The IRS is clear, do not enter. IRS Publication 970, Tax Benefits for Education states:
If the entire 1099-Q went to qualified expenses, room and board, tuition, etc then you do not need to enter the form. Tuition paid for the first 3 months of the next year also qualify, see page 12, What Expenses Qualify, and page 52 for qualified distributions.
Page 45 repeats: Don't report tax-free distributions (including qualifying rollovers) on your tax return.
2. The student has no concern and does not enter.
3. When you enter the 1098-T on your return, you will be able to move properly through the screens without the Q in the way.
4. The 1098-T is only entered in the student's return if there is taxable scholarship income.
5. The parent uses the 1098-T for any additional expenses not covered by the Q in order to claim the AOTC, if qualified.
The phaseout for AOTC is a modified AGI of:
- $80,000-$90,000 or
- $160,000- $180,000 MFJ
Example:
- $15,000 529 distribution. $12,000 went to room and board with $3,000 towards tuition, books, etc. The Q is used and not entered.
- 1098T shows $12,000 tuition. Plus you have additional expenses of $1,000 for books and miscellaneous. Total $13,000 tuition and books.
- The 529 paid $3,000 towards the tuition and books. If we subtract the $3,000 from the amount paid for tuition and books, we have $13,000- $3,000 = $10,000 actually spent out of pocket.
- Any amount over $4,000 for tuition expenses paid out of pocket is extra, not needed for calculating the AOTC.*
- In this case, the Q is not used, full AOTC is received.
@young23
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