Situation with rounded off numbers:
Got a 1099-Q from NY 529 (Parent as recipient), as payments made to school by parent were withdrawn later from 529 account by parent. Box 1 Value: $25000
Box 2 Earnings: $4500
Box 3 Basis: $20500
Box 6 Check if the recipient is not the designated beneficiary = Checked
Got a 1098-T from University (Student's name)
Box 1 Value: $24000
All other values blank
Student has no other income
Room & Board expenses (not included in 1098-T) = $2000
Other qualified expenses withdrawn from 529 (Laptop etc.) = $1000
So actually expenses for college clearly are more than 529 withdrawal.
When I answer the 1099-Q interview questions with Parent as recipient and student as beneficiary, and then go through 1098-T questions in expenses and add other expenses as above as well, it increases my federal liability by around $800.
Parents do not qualify for any other education credits as income is well over the threshold of $180000.
My question is why should I have any tax liability if all 529 withdrawals are for allowed expenses only?
