Q. Where do I file when we paid off $10,000 of student loans in 2024?
A. For most people, nowhere.
The tuition credit is claimed when the loans are use to pay for tuition and other qualified expenses. You cannot claim the tuition credit because you repaid the loan.
You can claim the interest portion of the loan payoff , as an adjustment to (deduction from) income.
If you have a 529 plan, the payment of student loans is now (recent law change) allowed as a qualified expense. That option will come up in the 1099-Q interview. Or your can just exclude it.
You can just not report the 1099-Q, at all, if your student-beneficiary has sufficient educational expenses, (including student loan payments up to $10,000) 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. 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”.
