Q. Where do I enter the info from 1098-T?
A. You enter it on your return to claim the AOC.
Q. I'm tempted to enter that info on both ours and our daughter's returns, just to cover my bases. But is that wrong?
A. Yes, in your case. Nothing needs to be entered on her return. The 1098-T and 1099-Q are only informational documents. The numbers on them are not required to be reported.
Q. Also, where do I enter the info from 1099-Q? On my daughter's because she's the student/beneficiary? or on ours since we are taking the AOC? On our return because we are the owner?
A. None of those. When it has to be entered, it is entered by the "recipient". The recipient is identified as such on the 1099-Q. In your case, the ESA distribution amount is fully covered by adjusted (for the AOC & scholarships) and does need to be entered at all.* The interview is complicated and it's easy to make mistakes. Avoid it if you can and you can.
Q. Who takes the $472.51 deduction for education expenses? Does it matter or does it have to be the person who takes the AOC?
A. The person who takes the AOC includes that amount in calculating the AOC. There is no separate deduction.
*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 don't need it). 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 have effectively done that). 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”.
- ("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."
