Did you 529 distribution exceed the education expenses for your dependent?
The 529 distribution (reported on Form 1099-Q) only needs to be reported on the tax return of the person whose SSN is on the form if the withdrawal is more than the tuition paid in Box 1 of the 1098-T plus other adjusted qualified educational expenses. In that case, the earnings on the excess distribution would be taxable income.
First, determine if the Form 1099-Q needs to be reported on the tax return by comparing the withdrawal with the tuition paid on the 1098-T added to other qualified educational expenses. To find out what are qualified educational expenses, review the IRS Tax benefits for education: Information center. Refer to the TurboTax articles Guide to IRS Form 1099-Q: Payments from Qualified Education Programs and What is IRS Form 1099-Q? for further details.
Secondly, enter the 1099-Q if the withdrawal exceeds the educational expenses by following the directions in the TurboTax Help article Where do I enter a 1099-Q?
When the student's school expenses are paid with these funds, you can't claim a tuition deduction or either of the educational tax credits for the same expense.
The matter of not being able to add room and board expenses for a 529 plan distribution s is a known issue in TurboTax and we are working to resolve it as soon as possible. As soon as we have a resolution for you, it'll be shared on Community.
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