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.
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”.
Otherwise, the student loan payment question does come up in the 1099-Q interview.
In TurboTax (TT), enter at:
Federal Taxes Tab (Personal for H&B version)
Deductions & Credits
-Scroll down to
--Education
--ESA and 529 Qualified Tuition Programs (1099-Q)
