1099-Q "Earnings"

[Gderoche]

If all of the gross distribution are used for approved expenses, how are the "Earnings" calculated?  Box 1 is $15,000, Box 2 is $6236.49, and Box 3 is $8763.51.  The $6236 is being considered unearned income.  All of the $15,000 was used for approved expenses.  Is there somewhere to claim that these earnings were for approved expenses?  

Thanks,

Glenn Derochers

[AmyC]

Yes, it is not taxable. You have two options. 

1. Tuck the 1099-Q in with your tax forms and all of your qualified education expenses and do not enter on return. See page 52 for qualified distributions at IRS Publication 970, Tax Benefits for Education.

2. Enter all the education expenses, then enter the 1099-Q, Please see my 529 example with IRS information here.