Entering 1099-Q and scholarship refund

2 replies
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Hello,

I reported a 1099-Q distribution for my son’s qualified tuition program expenses, as he is a dependent. However, the university later refunded 25% of the amount due to a scholarship.

Even though I indicated that not all of the original distribution was used for expenses, the system did not prompt me to adjust or enter a taxable amount. Where should I report the refunded portion, and will it be subject to taxes?

Note - I did not receive a form 1098-T from the university

1099

AmyC

Alumni - Intuit

It depends. First, we have to determine if you actually have a taxable portion

If all of it was used for 529 qualified Room and Board and Qualified Education Expenses - Internal Revenue Service, then none of it is taxable. Note, kids at home have room and board, maybe internet expenses also.
If you really don't have enough allowed expenses, then you will have a taxable portion.

Second, if you have a taxable portion:

Reduce the amount of qualified tuition to create the taxable portion. The amount will vary based on your qualified expenses from the first bullet.

I suspect it isn't taxable since the amount must have been low enough to not get a 1098-T. Unless, it isn't qualified tuition and it is all taxable. Tuition must be paid to an Eligible Educational Institution - Internal Revenue Service.

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