topic Can't Enter Room and Board to Offset 529 withdrawals in Education

Can't Enter Room and Board to Offset 529 withdrawals

bmgreer — Sun, 15 Feb 2026 22:09:15 GMT

Posting my complaint about not being prompted to enter room and board expenses to offset 529 withdrawals. When is Intuit going to fix this? Used TT for 30 years and this is ridiculous! This will lead to people paying taxes and penalties.

Re: Can't Enter Room and Board to Offset 529 withdrawals

Bsch4477 — Sun, 15 Feb 2026 22:31:17 GMT

Yes, this is a known issue. Be aware, though, that if you used all of your 529 withdrawal for qualified education expenses you don’t have to report your 1099-Q at all.

Re: Can't Enter Room and Board to Offset 529 withdrawals

Hal_Al — Sun, 15 Feb 2026 23:13:29 GMT

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."

Re: Can't Enter Room and Board to Offset 529 withdrawals

bmgreer — Sun, 15 Feb 2026 23:13:43 GMT

Yeah, that's not an acceptable work around. The IRS will see withdrawals in excess of what's on the 1099-Q and it could cause problems. Rather not have to justify the additional spending on off-campus room and board to them.

Re: Can't Enter Room and Board to Offset 529 withdrawals

Hal_Al — Sun, 15 Feb 2026 23:14:21 GMT

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 should claim the tuition credit before claiming the 529 plan earnings exclusion. 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 earnings are tax free; 40% 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 $14,600 of taxable scholarship (in 2024) and still pay no income tax.

Re: Can't Enter Room and Board to Offset 529 withdrawals

bmgreer — Sun, 15 Feb 2026 23:19:24 GMT

It's simple. Intuit should fix the problem.

Re: Can't Enter Room and Board to Offset 529 withdrawals

talltodd — Mon, 16 Feb 2026 15:39:19 GMT

It worked last year so shouldn't be that difficult to make it work this year.

Re: Can't Enter Room and Board to Offset 529 withdrawals

user17700667800 — Mon, 16 Feb 2026 20:25:49 GMT

Totally agree.....it was there last year.....I'm more upset there was NO notification upfront and once error discovered NO notification of when it will be resolved.....POOR customer service for sure

Re: Can't Enter Room and Board to Offset 529 withdrawals

user17700667800 — Mon, 16 Feb 2026 20:30:09 GMT

Like many others I get nervous not reporting if I get a form that says "the information is being furnished to the IRS" Also I'm sure most of us got a 1098-T for the tuition.....so if we skip adding that as well feels like red flags at IRS may go off?

Re: Can't Enter Room and Board to Offset 529 withdrawals

AnnetteB6 — Wed, 18 Feb 2026 20:31:48 GMT

The experience described here is expected to be resolved in a TurboTax update to be released by February 27th.

@user17700667800

@bmgreer

Re: Can't Enter Room and Board to Offset 529 withdrawals

RI-MJM — Sun, 22 Feb 2026 21:40:28 GMT

Glad to hear a fix is in the works. This is an extremely common tax situation that the software should handle. I buy TT so I don't have to wade into the forms / worksheets, so my tax liability is what it should be, and so I can complete my taxes in a reasonable amount of time. If I have to rely on AI, the TT community, and "work-arounds," this product loses significant value. I nearly overpaid my taxes because of this problem. I caught the issue, but I'm still not happy.

Re: Can't Enter Room and Board to Offset 529 withdrawals

talltodd — Fri, 27 Feb 2026 15:29:01 GMT

The 2/26 update seems to fix it.

Re: Can't Enter Room and Board to Offset 529 withdrawals

talltodd — Fri, 27 Feb 2026 17:17:51 GMT

There's been another update on 2/27/26.

Re: Can't Enter Room and Board to Offset 529 withdrawals

jonwaz5407 — Sun, 15 Mar 2026 18:28:17 GMT

The error (distributions from ESAs and 529 plans) resulting in taxable income for eligible expenses is still present as of March 15, 2026. What is your timing on getting this resolved?

Re: Can't Enter Room and Board to Offset 529 withdrawals

bmgreer — Sun, 15 Mar 2026 18:58:09 GMT

It worked for me as of the Feb 27 update.

Re: Can't Enter Room and Board to Offset 529 withdrawals

jonwaz5407 — Sun, 15 Mar 2026 19:11:59 GMT

We had withdrawals from both an ESA and a 529. The withdrawals were used for qualifying expenses. It’s still glitching

Re: Can't Enter Room and Board to Offset 529 withdrawals

MarilynG1 — Mon, 16 Mar 2026 20:08:27 GMT

If your ESA or 529 withdrawals were all for qualified education expenses, you don't need to enter Form 1099-Q in your return. Keep your own records of what was paid with the distributions.

If you received a 1098-T, you can report that in TurboTax, as you may qualify for an Education Credit.

Here's more detailed into on Form 1099-Q.

@jonwaz5407

Re: Can't Enter Room and Board to Offset 529 withdrawals

jonwaz5407 — Mon, 16 Mar 2026 20:21:38 GMT

Thanks. I’m a CPA. I know I can do that as a stop gap. The software used to work and we’ve only taken the withdrawals to pay eligible expenses. It’s for my daughter’s tax return and she will not qualify for any education credits as our dependent.

I’d like to know the timing on when this will be resolved systematically since it worked in prior years. I’ll do the stop gap if push comes to shove and make notes in my file.

Re: Can't Enter Room and Board to Offset 529 withdrawals

user17700667800 — Mon, 16 Mar 2026 20:34:03 GMT

hey..it was resolved.......tricky to get to it but if you are slecting the right boxes then the one with the "room and board" comes up and you can enter the $$ there......

Re: Can't Enter Room and Board to Offset 529 withdrawals

jonwaz5407 — Mon, 16 Mar 2026 20:43:59 GMT

This is the fifth year in a row that I’ve done this and the second time I’ve had withdrawals from both a 529 and an ESA. It’s a systemic problem not a user error.

I only want to hear about the date this will be fixed.