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Qualified Tuition Plans  (QTP 529 Plans) Distributions General Discussion It’s complicated. For 529 plans, there is an “owner” (usually the parent), and a “beneficiary” (usually the student dependent). The "recipient" of the distribution can be either the owner or the beneficiary depending on who the money was sent to. When the money goes directly from the Qualified Tuition Plan (QTP) to the school, the student is the "recipient". The distribution will be reported on IRS form 1099-Q.  The 1099-Q gets reported on the recipient's return.** The recipient's name & SS# will be on the 1099-Q. Even though the 1099-Q is going on the student's return, the 1098-T should go on the parent's return, so you can claim the education credit. You can do this because he is your dependent. You can and usually should claim the tuition credit before claiming the 529 plan earnings exclusion (unless your income is too high).  The American Opportunity Credit (AOC or AOTC) is 100% of the first $2000 of tuition and 25% of the next $2000 ($2500 maximum credit). The educational expenses he claims for the 1099-Q should be reduced by the amount of educational expenses you claim for the credit. Room and board (R&B) are also qualified expenses for the 529 distribution, but not the AOC (R&B are also not qualified expenses for a scholarship to be tax free). But be aware, you can not double dip. You cannot count the same tuition money, for the tuition credit,  that gets him an exclusion from the taxability of the earnings (interest) on the 529 plan. Since the credit is more generous; use as much of the tuition as is needed for the credit and the rest for the interest exclusion. Another special rule allows you to claim the tuition credit regardless of whose money was used to pay the tuition. In addition, there is another rule that says the 10% penalty is waived if he was unable to cover the 529 plan withdrawal with educational expenses either because he got scholarships or the expenses were used (by him or the parents) to claim the credits. He'll have to pay tax on the earnings, at his lower tax rate (subject to the “kiddie tax”), but not the penalty.   Total qualified expenses (including room & board) less amounts paid by scholarship less amounts used to claim the Tuition credit equals the amount you can use to claim the earnings exclusion on the 1099-Q.  Example:   $10,000 in educational expenses (including room & board)    -$3000 paid by tax free scholarship***    -$4000 used to claim the American Opportunity credit  =$3000 Can be used against the 1099-Q (on the recipient’s return)   Box 1 of the 1099-Q is $5000 Box 2 is $2800 3000/5000=60% of the distribution is qualified, so 40% of the earnings are taxable 40% x 2800= $1120 There is  $1120 of taxable income (on the recipient’s return)   **Alternatively; 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. You would still have to do the math to see if there were enough expenses left over for you to claim the tuition credit. Again, you cannot double dip!  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, in case of an IRS inquiry. 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."  ***Another alternative is have the student report some of his scholarship as taxable income, to free up some expenses for the 1099-Q and/or tuition credit. Most people come out better having the scholarship taxable before the 529 earnings. A student, with no other income, can have up to $15,750 of taxable scholarship (in 2025) and still pay no income tax. 

TurboTax is broken*.   The 1099-Q is  only an informational document. The numbers on it are not required to be entered onto your (or your student's) tax return. The interview is complicated and it's easy to make mistakes. Avoid it if you can and you probably can.  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. You also cannot count expenses that were paid by tax free scholarships. 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."    *One frequent problem, I've seen in this forum,, and it carries over from last year, is that TT has allocated $10,0000 of expenses to the tuition credit, instead of the more appropriate $4000 (or $0 if you  are not claiming the credit).  In the past, TT provided a screen  titled  “education expenses used for a tax credit”. It was usually prepopulated (often with $10K). You could change it for the amount you want to allocate to the ed credit. So far, this year, I haven't found that screen, even after recent updates. If you don't get that screen, you can check the student information worksheet. You can manually change it there (line 18). Make the change in the first column, on the left. It was line 17 prior to 2025.  

To report the income as non-passive, be sure you indicate you materially participate in the investment. Also note that all income reported in Box 1 is considered business income (non-passive). If the material participation checkbox doesn't report non-passive income, create a new K-1 with the same information from Part I and only the problematic income in Box 1.   To summarize: Enter the K-1 as received, except for the income that you need to be non-passive. Report that income in Box 1 on a separate K-1.   @musiclover 

Market discount is the difference between what you paid for a bond, and the maturity redemption price.  If you bought a $1000 bond for $950, your market discount is $50.  This discount must be included in your income, as interest, either over the period you own the bond, or when it is sold.  In box 1f your broker is reporting the accrued amount of discount over the time you held the bond. TT will show it as interest income on Schedule B (look and see if it's on that form), and then subtract the same amount from your gain on the sale (Form 8949), since it's already been reported elsewhere.  @AwesomeTom               

The misconception that none of the contributions are taxed, seems to be a common theme, with financial advisors.  I have used the steps in TT Community to enter Backdoor Roth.   You need to enter contributions 1st Then you add in the 1099R form   There is a AGI limit Contribution Limit anything beyond the contributions is considered taxable.   

Can someone please clarify for me? I bought my investment property brand new last year Feb 2025. Solar came pre-installed with it. When I signed the contract in October 2024, the property was under construction.   In For 3468, where is the right place to request Solar credit, under Section 48 (Part VI) or under Section 48E (Part V)? Reading through online it seems I am at crossroads between the "old" Section 48 and the "new" Section 48E. Thanks in advance

Medical Expenses are only deductible if you itemize your deductions.    You can switch to itemized to see the difference, but TurboTax will default to better (higher) deduction.      How do I change from the standard deduction to itemized (or vice-versa)?    This link has instructions to manually change your deduction - you will be able to change it back and forth if you manually change it.  

TurboTax has a built-in Final Review/Smart Check that scans the return for errors, missing info, and audit risks before you file. We also offer a 100% Accurate Calculations Guarantee so you can feel assured your refund is correct if everything is entered appropriately. 

The error with Box 12a Code TT (Qualified Overtime Compensation) in TurboTax occurs because some employers began using the new 2026 tax year codes early, while the 2025 TurboTax does not yet have "TT" in the dropdown menu. The code "TT" represents the "and-a-half" premium portion of overtime pay that is tax-free at the federal level.   Delete the entry- Do not try to select a code from the dropdown menu for the "TT" entry. Finish entering all other information from your W-2 (Boxes 1, 2, 16, etc.) and click Continue. Continue through the interview until the program asks, "Do any of these uncommon situations apply to this W-2?" Choose the checkbox for Overtime pay.  A follow-up screen will allow you to enter the dollar amount listed next to code TT on your W-2. On the screen "Let's see if your overtime qualifies as tax-free," select "No help needed—I know what to enter". 

Thank you as always @Hal_Al for a quick and helpful response.  I really appreciate your taking the time to help and educate us. I initially had interpreted that the living expenses such as rent and utilities of a “dependent” college student, should be allocated based on the period that they were “physically” present at the parents’ home.  This is usually 3-4 months a year for a full-time student who returns home for summer and winter breaks.  By reading Pub 501 and your explanation, it seems that the lodging expenses or “Fair Rental Value” is allocated to dependent students on an annual basis, whether they have “physically” lived at home with the parents for the whole year or they attend an out-of-state college and only return home for breaks and holidays.  This method certainly helps parents to meet the support test for a qualifying child and claim the students as their “dependents” on the parents’ returns. The total of my son’s wages and Sch C (self-employed) earnings was about $9k.  As you mentioned per Pub 501, scholarship and savings of student-child are not used in determining whether the child provided more than half of their own support”.  And it seems we do not need to include federal, state and local income taxes paid by students from their own income and scholarships in the total support calculation either.  These are all great news.  However, Pub 501 did not seem to address how to treat the income from Form 1099-Misc.  I assume if the 1099-Misc income is from rental property then it is considered “earned income”.  But if it’s from summer internships, travel or research stipends, fellowships and such, the 1099-Misc income is not considered “earned income” for purposes of the child dependent support test so they can be excluded like scholarship monies.  Is that correct?  Thank you again for your time and insight.

This IRS Publication, page 13, states:   Transportation    You can include in medical expenses amounts paid for transportation primarily for and essential to medical care.   You can include:    • Bus, taxi, train, or plane fares or ambulance service;  • Transportation expenses of a parent who must go with a child who needs medical care;

If you received a 1099-Q and the full distribution was used on qualified education expenses, you should delete it as the form does not represent taxable income.    When you receive IRS Form 1099-Q, you'll need to report this information on your tax return if the distribution is used for non-qualifying expenses.   If your distribution matches or is less than the qualifying educational expenses, you don't need to report it as income; however, any excess is typically taxable and could be subject to a penalty.  See 1099-Q   How to delete forms in TurboTax Online    How to delete forms in TurboTax Desktop   If you do have taxable income from a 1099-Q, you can enter that information in the 1098-T interview.   Where do I enter a 1099-Q?  

Yes. Considering the estate is settled and there is nothing left for you to be paid from, any amount that you were not paid back would be deductible as nonbusiness bad debt.   To enter this in TurboTax select the following: Federal Deductions and Credits Other Deductions and Credits Non Business Bad debt