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If your Distribution did not exceed your Qualified Education Expenses then you don't have to enter the information from 1099-Q at all.
If the Distribution doesn’t exceed the amount of the student's qualifying expenses, then the distribution is not Taxable and you don't have to report any of the distribution on your tax return. I understand that this sounds strange, especially regarding taxes, but the IRS does not request any additional information to substantiate whether or not your Distribution exceeded your actual qualified expenses. Nevertheless it would be wise to keep a good record of these expenses just in case your return gets picked up for examination.
To correct this issue simply remove the information you entered from 1099-Q, or if you like, TurboTax allows you to substantiate this information by countering the amount from the Distribution (therefore removing the taxable income) by entering Education expenses. You can find the Education Expenses Section under Deductions and Credits. Another reason it would be beneficial to enter the Qualified Education Expenses is for the American Opportunity Credit. When you use distributions from an ESA and your expenses exceed the distribution amount, the excess can be considered for this credit. Nevertheless your child must qualify for the American Opportunity Credit. More details on this credit are below:
The American Opportunity Credit can save you up to $2,500 in tax for the education expenses of each eligible student. To qualify, the student must pursue a degree at a school that is eligible to participate in the federal student aid program. The credit is only available to students in their first four years of attendance, who enroll at least half time for one academic period during the tax year and do not possess a felony drug conviction.
The credit amount includes the costs you incur for tuition, fees and course-related books, supplies and equipment necessary to attend the institution. If the credit amount exceeds the amount of tax you owe, you can receive up to $1,000 of the credit as a refund.
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