- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
529 plan with a scholarship
My parents opened a 529 plan for me, but I used very little of the money because I received scholarships that covered most of my educational expenses. I'm now graduating from graduate school, so my parents directed a final distribution of the remainder of the account balance to me. I have a 1099-Q showing me as the beneficiary, the gross distribution ($127,000), the earnings ($100,423), and the basis ($16,577). I also have about $12,000 in additional earned income between me and my wife (filing jointly).
Over the past 8 years, I've received a total of over $127,000 in scholarships. In 2024, I received $17,875 in scholarships as documented on my 1098-T. My 1098-T also states I had $27,932.29 in education expenses. My parents paid the difference ($10,057.29) with a separate 529 distribution that they are claiming on their taxes.
I know that distributions in excess of qualified educational expenses due to scholarships are exempt from the 10% penalty, but still taxable as income. I have two questions.
1) Should I use the $17,875 as the component that was withdrawn due to scholarship, or can I include scholarships from prior tax years?
2) Either way, how do I enter this in TurboTax? I've seen the workaround based on listing the 1099-Q student as "someone else not listed here", but trying that still did not give me an option to adjust the portion that is exempt from the 10% penalty.
Thank you!