Do I have to report my 1099-Q data if my qualified college expenditures were EXACTLY the amount I withdrew throughout the year?

nataliemarian199 — Tue, 04 Jun 2019 23:16:03 GMT

... the 1099-Q income was from my 529 plan.

No. You can just not report the 1099-Q, at all, if your s...

Hal_Al — Tue, 04 Jun 2019 23:16:04 GMT

No. 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.

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But, you actually may want to pay some tax on that distribution so that you can claim an education credit. You can and should claim the tuition credit before claiming the 529 plan earnings exclusion, because it is more generous. The educational expenses you claim for the 1099-Q should be reduced by the amount of educational expenses you claim for the credit.

But be aware, you can not double dip. You cannot count the same tuition money, for the tuition credit, that gets you 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.
In addition, there is another rule that says the 10% penalty is waived if you were unable to cover the 529 plan withdrawal with educational expenses either because you got scholarships or the expenses were used to claim the credits.

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

Box 1 of the 1099-Q is $5000

Box 2 is $600

3000/5000=60% of the earnings are tax free

60%x600= $360

You have $240 of taxable income (600-360)

topic Do I have to report my 1099-Q data if my qualified college expenditures were EXACTLY the amount I withdrew throughout the year? in Retirement tax questions

Do I have to report my 1099-Q data if my qualified college expenditures were EXACTLY the amount I withdrew throughout the year?

No. You can just not report the 1099-Q, at all, if your s...