Q. Where do I report that income so that it is properly taxed, but not penalized?
A. You first enter the 1099-Q at ESA and 529 Qualified Tuition Programs (1099-Q). Then you enter your expenses and scholarship at Education Expenses and Scholarships (1098-T). It must be in that order.
In TurboTax (TT), enter at:
Federal Taxes Tab (Personal for H&B version)
Deductions & Credits
-Scroll down to:
--Education
--Education Expenses and Scholarships (1098-T)
--ESA and 529 Qualified Tuition Programs (1099-Q)
But, it's not that simple. Room and board (R&B), even if you live at home are qualified expenses for a 529 distribution (but not for an education credit or tax free scholarship. So, not all of the 529 earnings will get tax. Furthermore, you may need to allocate expenses to the credit and/or to scholarships. So, it pays to have an idea of what you're wanting as you go thru the TT interview.
Provide the following info for more specific help:
- Are you the student or parent.
- Is the student the parent's dependent.
- Box 1 of the 1098-T
- box 5 of the 1098-T
- Any other scholarships not shown in box 5
- Does box 5 include any of the 529/ESA plan payments (it should not)
- Is any of the Scholarship restricted; i.e. it must be used for tuition
- Box 1 of the 1099-Q
- Box 2 of the 1099-Q
- Who’s name and SS# are on the 1099-Q, parent or student (who’s the “recipient”)?
- Room & board paid. If student lives off campus, what is school's R&B on campus charge. If he lives at home, the school’s R&B “allowance for cost of attendance” for student living with parents.
- Other qualified expenses not included in box 1 of the 1098-T, e.g. books & computers
- How much taxable income does the student have, from what sources
- Are you trying to claim the tuition credit (are you eligible)?
- Is the student an undergrad or grad student?
- Is the student a degree candidate attending school half time or more?
