Q. $3,465 in nonrefundable credits seems too high plus $990 refundable AOTC and I am concerned something is wrong.
A. No, that's probably right, for 2 students. $2000 LLC + 1500 AOTC = $3500 max. x 0.99 = 3465.
Yes, $3465 represents ~$1980 LLC for son1 and ~$1485 AOTC for son 2.
Yes, basically $2k LLC for son 1 and $2500 AOTC for son 2 = $4,500 without phase out/multiplier.
Q. I read here to not include my son's 1098-Q ?
A. That's correct. Don't enter your 1099-Q either.
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. For son 1, your numbers show that there is more than $10K left over for the max LLC. That assumes the $8000 room and board mentioned was for son 1.
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."
How much room and board expenses does son 2 have?
- If student lives off campus, what is school's R&B on campus charge. If he lives at home, what's the school’s R&B “allowance for cost of attendance” for student living with parents.
What Other qualified expenses does he have? How much for books and a computer, if any?
You need about $9400 more expenses or some of the 1099-Q and/or some of his scholarship is going to be taxable. Does he have any other income to report.
