I want to thank everyone for their extensive and very thoughtful responses. Just as an FYI. The 1099-Q distribution comes directly to my bank account and I pay the college directly. For this reason, I am the recipient and my granddaughter is the beneficiary. I have a paper trail of the money coming in and going directly to the school for qualified expenses. Since my granddaughter is not my dependent, I cannot add 1098-T data to my return on her. I think it is for this reason that TurboTax for 2024 is calculating a portion of the 1099-Q distribution as taxable on my return. I will just delete the 1099-Q as I have records that my payments to the college are fully covered by qualified expenses.
I guess the interesting part is that I have entered the 1099-Q every year in TurboTax without entering any 1098-T data in “Education Expenses” and my Federal Tax was never affected. The amount owed was the same whether I entered the 1099-Q or not. Whatever was changed in the program for 2024 is a mystery that TurboTax cannot explain to me and how the approximately $1000 increase in Federal Tax is calculated also cannot be explained.
In the end, I will just delete the 1099-Q and move on. The bad part is that I have a grandson that started college last year so I have to deal with two 1099-Q and I have five more grandchildren in line to go to college in the future so I will be dealing with this for a decade. Guess it is what we get for being helpful. Thanks to everyone.
