topic Re: 1099-Q and 1098-T questions in Education

1099-Q and 1098-T questions

wilensdavid — Thu, 05 Mar 2026 18:03:52 GMT

My son is not a dependent. We paid for his 2025 graduate school via a 529 qualified withdrawal equal to the tuition charges from his school via direct payment to the school from the 529 plan.

My son received the 2025 1099-Q for the withdrawal total of $13,388 and a 1098-T for the schools payments received of $16,440 (minus a scholarship of $3,052). These amounts match so there should not be any income attributable to my son for the 529 withdrawal.

On his tax return, schedule 1 (line 1z) is showing $5,218 of additional income from the 1099-Q withdrawal. This doesn't make sense to me as he didn't receive the money directly, and 100% of it was used for qualified tuition expenses.

Can someone help me to figure out how to correct in Turbotax? We are using the desktop Mac version.

Re: 1099-Q and 1098-T questions

MinhT1 — Thu, 05 Mar 2026 19:24:36 GMT

If you are satisfied that the 529 distribution was used entirely for education expenses (including room and board). Just keep form 1099-Q in yourtax records.

See this TurboTax article.

Also, 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."

Re: 1099-Q and 1098-T questions

Hal_Al — Thu, 05 Mar 2026 20:18:25 GMT

Confirming what @MinhT1 said,

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."

Another thing for consideration; room and board are qualifies expenses for a 1099-Q (529 distribution). Rather than using all the after scholarship tuition for the 1099-Q, allocate his room and board to the distribution (also books and computer) to free up some tuition for the Lifetime Learning Credit (LLC). Grad students are not eligible for the more generous American Opportunity Credit (AOC or AOTC).

Re: 1099-Q and 1098-T questions

Hal_Al — Fri, 06 Mar 2026 15:08:28 GMT

Q. Can someone help me to figure out how to correct in Turbotax?

A. One problem, I've seen, and it carries over from last year, is that TT has allocated $10,0000 of expenses to the tuition credit, even though the student is not claiming the credit. In the past, TT provided a screen titled “education expenses used for a tax credit”. It was usually prepopulated (often with $10K). You could change it for the amount you want to allocate to the ed credit (probably $0 in your current scenario). So far, this year, I haven't found that screen, even after the Feb 26-27 updates.

If you don't get that screen, you can check the student information worksheet. You can manually change it there (line 18*). Make the change in the first column, on the left

*line 17 prior to 2025

Re: 1099-Q and 1098-T questions

wilensdavid — Thu, 05 Mar 2026 20:47:58 GMT

Thank you for the reply. Are you saying that I can delete the 1099-Q from his tax return as 100% of the distribution from the 529 went to a qualified tuition payment?

Re: 1099-Q and 1098-T questions

wilensdavid — Thu, 05 Mar 2026 20:57:57 GMT

Hi,

Thank you for the reply. I changed the $10k to zero on the student worksheet (line 18) on the form, not line 17. After that change, the $5,213 in additional income disappeared and I haven't deleted the 1098-Q form his return. Also noticed the AOC credit he was getting also went away so his refund was adjusted downward.

Does all this make sense to you, is this the correct approach?

Re: 1099-Q and 1098-T questions

Hal_Al — Thu, 05 Mar 2026 22:14:42 GMT

Q. Are you saying that I can delete the 1099-Q from his tax return as 100% of the distribution from the 529 went to a qualified tuition payment?

A. Yes, as long as there was no double dipping Counting the tuition for the AOC and/or tax free scholarship.*

Q. Does all this make sense to you, is this the correct approach?

A. Generally, but with, at least, a couple of adjustments. 1. Change the $10K to $4000 (not 0), the amount needed to get the maximum AOC. 2. Enter room and board expenses, and any books, computer expenses.

*If you know that the room and board and books &computer expenses plus the tuition not used for the AOC totals more than the box 1 amount on the 1099-Q, you can delete the 1099-Q from his tax return as 100% of the distribution from the 529 still went to a qualified educational expenses (it doesn't have to be just for the tuition). Student must be half time or more to count room and board for a 529 distribution.

Re: 1099-Q and 1098-T questions

user17727319970 — Fri, 06 Mar 2026 13:56:09 GMT

Thank you for your advice. He lived away from us last year, so no dependent status on our return. Can I use his rent as the room / board and change the line 18 credit from zero (now) up to $4k (portion of his rent) to get some AOC credit without triggering the additional income being attributed to the 529 distribution earnings?

Re: 1099-Q and 1098-T questions

Hal_Al — Fri, 06 Mar 2026 15:22:31 GMT

Q. Can I use his rent as the room / board and change the line 18 credit from zero (now) up to $4k (portion of his rent) to get some AOC credit without triggering the additional income being attributed to the 529 distribution earnings?

A. Yes. Off campus rent and food are eligible expenses for a 529 distribution. But, the amount is limited to the lesser of your actual cost or what the school charges on campus students for R&B (technically the school's "allowance for cost of attendance" for financial aid purposes).

Re: 1099-Q and 1098-T questions

TopShelfTax — Fri, 06 Mar 2026 18:34:12 GMT

@wilensdavid

The amount used for credit should be 4k if you are eligible to collect the entire AOC (100% of the first 2k [2k] in expense and 25% of the next 2k [500]) for a total credit of 2500. If getting the LLC its calculated 20% of expenses up to 10k in expense. TT will at the least assign 10k to line 18 (for credit) even if that amount is not required to claim that credit. It may even assign all you 1098qt amount, thereby not allowing the excess to offset your 1099q. What you need to do is before making any adjustments to the credit line is determine how much of a credit you are getting and which one. Then adjust the credit line 18 in the student info worksheet to the amount needed to secure that credit, that will allow any excess amount to flow into the calculation of the 1099q offset. TT is not doing things right with this area, but it does at least make sure you don;t double count expenses. If you have more than one dependent for which you are claiming the expenses and getting education credits you need to determine the amount of expenses that are required to maximize the credit for each and adjust accordingly to line 18 in their student info wks.

The peoples wks is where you can add expenses for room, board, computers etc for each dependent, though it looks like the interview lets you enter those now. The program just doesn't seem to function correctly for calculating credits vs allocating expenses.

The easiest thing to do is simply omit the 1099q income all together from the return if you know you have records of expenses that offset it. You would need that in the case where you got an IRS notice to prove your entries, which would be rare, though I do think its misleading and people are going to miss out on refunds as a result of miscalculations in TT.

Re: 1099-Q and 1098-T questions

wilensdavid — Fri, 06 Mar 2026 19:58:36 GMT

Thank you for the response. If I wanted to just eliminate the 1098-Q altogether in TT, how do I actually do it? I tried to delete the form to see what that would to do the overall return, but I am unable to do so.

Thinking I don't need to include it, as many have said, and I have the details on the eligible expenses incurred so not a problem should the IRS come around to ask at some future point.

Re: 1099-Q and 1098-T questions

TopShelfTax — Fri, 06 Mar 2026 21:57:02 GMT

You don't want to omit the 1098-t that is what qualifies you for any education credits, AOC or LLC in TT. You want to omit the 1099q income, assuming you know you have educational expenses that offset it fully in excess of whatever expenses you require to get the credit your claiming.

If you not eligible for either education credit and you know expenses offset fully you can omit both the 1098t and the 1099q from your return.

In my personal situation I was not eligible for the AOC or LLC credit because my income phased me out fully, but TT still assigned the full amount I reported from my 1098t in conjunction with that credit (line 18 on student info wks), which left some of the 1099q income i reported not fully offset by expenses i entered. In my situation i set that credit used amount to 0 to get it to correctly offset the income. But if you want TT to assess your eligibility for the credits you need to enter that 1098t.

Re: 1099-Q and 1098-T questions

Hal_Al — Fri, 06 Mar 2026 22:08:11 GMT

TT Support article Delete form instructions

If you are using the desktop, switch over to Forms mode. Locate the forms from the left, select delete. See https://ttlc.intuit.com/turbotax-support/en-us/help-article/tax-forms/delete-tax-form-turbotax-cd-download-software/L2d7wSGxc_US_en_US

If you are online, look at the menu on the left side and select tax tools, then tools. See https://ttlc.intuit.com/turbotax-support/en-us/help-article/tax-forms/view-delete-forms-turbotax-online/L7SZhwCHv_US_en_US