I was using TurboTax to do my taxes and had a refund of $677. I then entered 1098-Q (529 plan dist) data and that turned into tax due $322. Is that not tax free?

[KrisD]

The distribution is only tax-free if you used it for education expenses. 

If you did use it for education expenses, specify that when you answer the interview questions that follow the 1099-Q entry screen. 

You can go back to the interview by clicking Federal, Deductions & Credits and scrolling down to Education.

If you didn't use it for education, it will be taxed and incur a penalty tax. 

CLICK HERE for IRS Pub 970 Tax Benefits for Education

[pianoboy1]

Hi, Kris - thanks for the response!  I did use the 529 plan distribution ($10,000 total, $6500 basis, $3500 interest) for college expenses.  When I entered the education expenses ($12,900) into TurboTax, the amount of my refund went up, but not to the original $677.  I then found a workaround for a TurboTax bug (search for "Why is the 529 distribution from my 1099-Q showing up as taxable income?") and then it behaved as expected.

[pianoboy1]

Hi, Kris - thanks for the response!  I did use the 529 plan distribution ($10,000 total, $6500 basis, $3500 interest) for college expenses.  When I entered the education expenses ($12,900) into TurboTax, the amount of my refund went up, but not to the original $677.  I then found a workaround for a TurboTax bug (search for "Why is the 529 distribution from my 1099-Q showing up as taxable income?") and then it behaved as expected.

[pianoboy1]

Hi, Kris - thanks for the response!  I did use the 529 plan distribution ($10,000 total, $6500 basis, $3500 interest) for college expenses.  When I entered the education expenses ($12,900) into TurboTax, the amount of my refund went up, but not to the original $677.  I then found a workaround for a TurboTax bug (search for "Why is the 529 distribution from my 1099-Q showing up as taxable income?") and then it behaved as expected.

[KrisD]

Thank you for using TurboTax.