topic Parent withdrew from 529 and paid child's tuition. 1098-Q has earnings. Why am I being taxed? in Get your taxes done using TurboTax

Parent withdrew from 529 and paid child's tuition. 1098-Q has earnings. Why am I being taxed?

JK84 — Mon, 23 Feb 2026 12:44:30 GMT

I'm a parent who pays my daughter's tuition up front, then reimburse myself from her 529. I received a 1098-Q from the 529 savings account and my daughter received a 1098-T from her school. They offset each other.

The 529 account lists every withdrawal as qualified, so why does the 1098-Q have taxable earnings in box 2?

Re: Parent withdrew from 529 and paid child's tuition. 1098-Q has earnings. Why am I being taxed?

MaryK4 — Sun, 12 Feb 2023 16:11:32 GMT

The taxable earnings in Box 2 show the amount of interest on included in the total distribution. Your initial contributions are not taxable as they are a return of your contribution. The taxable earnings would be the amount you would pay tax on IF you did not use it for qualified educational expenses.

Re: Parent withdrew from 529 and paid child's tuition. 1098-Q has earnings. Why am I being taxed?

JK84 — Sun, 12 Feb 2023 17:13:27 GMT

100% of the withdrawal went toward my daughter's tuition. Her school's 1098-T "payments received" number matches the fund's 1099-Q gross distribution number. Shouldn't it be a wash?

1099-Q (sent to dad who pays tuition)

Box 1 Gross Distribution: $5000
Box 2 Earnings: $1500
Box 3 Basis: $3500

1098-T (sent to daughter from her college)

Box 1 Payments received for qualified tuition: $5000

TurboTax is taxing the 1099-Q earnings number. (which I feel is incorrect). As far as I know, I properly answered every question and expected the two transactions to offset each other.

Thanks in advance.

Re: Parent withdrew from 529 and paid child's tuition. 1098-Q has earnings. Why am I being taxed?

PattiF — Sun, 12 Feb 2023 17:11:36 GMT

It would be a wash since the tuition and the amount withdrawn from the 529 were equal.

You are not required to report this on your tax return. This will not be a red flag to the IRS. As long as the funds were used for qualified education expenses, the distribution is not taxable.

On form 1099-Q, instructions to the recipient read: "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.

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, there will not be a taxable distribution.1099

@JK84

Re: Parent withdrew from 529 and paid child's tuition. 1098-Q has earnings. Why am I being taxed?

JK84 — Sun, 12 Feb 2023 17:55:13 GMT

I figured it out. TurboTax lists my daughter as a non-dependent - which causes the taxation. I'll post another question about this.