Due to 529 being overfunded, we decided to take an amount equal to one semester scholarship in 2024, in addition to qualified educational expenses. Unclear the correct way to report this on both my taxes and my dependent’s taxes.
Details: 1099Q sent to my dependent - Box 1: 15337; Box 2 earnings $9749; Box 3 basis $5588.
1098-T Box 1 $5758; Box 5 $10,385, Box 8 at least half time student (student full time). NOTE: Box 5 is technically ‘over-stated’ because it includes scholarships for both Spring 2024 and Fall 2024; but because Spring 2024 was paid in December 2023, this scholarship was actually ‘used/applied’ in 2023. But I have no idea how to tell TT this or if it’s important.
Adjusted qualified educational expenses: $10,081
Dependent had a summer internship and earned $9758.
Dependent is age 22 in 2024, FT student who took one extra semester in this last year of college.
4 years of AOTC have previously been used (2020, 2021, 2022, 2023).
Questions:
(1) Where is 1099Q reported? On my return, on dependent’s return, on both?
(2) Where is 1098 T reported (mine, dependent’s, both?).
(3) I did find the worksheet/form on my taxes with the calculation on the amount of 529 excess distribution that should be reported on dependent’s tax return. The calculation was: AQEE of $10,081/ 529 distribution of $15,337 = .6573. Then .6573* 529 earnings of $9749. = $6408 (not taxed). $9749 – untaxed amount of $6408 = $3341 – this is the amount on which my dependent should be taxed, I believe. Note I went into forms view and edited the dependent worksheet to correctly calculate this number. No amount of using the step by step got me there.
(4) Is this amount above, $3341, considered EARNED or UNEARNED income to my dependent? It seems if it is earned, this will not be taxed. If unearned, it will be taxed.
(5) When I tried to enter this in TT for my dependent, I did manage to enter data to try to get it to tax the $3341 as unearned income, but now it stops me every time asking for line 6, Form 8615 from MY taxes, presumably to calculate the kiddie tax? Problem is my taxes have NO DATA in form 8615. Is that right or wrong?
Thank you!
