If my child is not a dependent and is the beneficiary of a 529 does she claim the income?

[v-lecea]

My daughter is 20 and earned 10,000+ last year.  I have a 529 account for her.  She is no longer my dependent, apparently.  Does she now show the 529 disbursement on her return as well as the expenses?  Do I just not show the account at all on my taxes?  The 1099Q show's me as recipient and not her.  is that a problem?

[MargaretL · Accepted solution]

Yes - your daughter claims 1099-Q from the 529 plan and her 1098-T to claim education expenses if she is no longer your dependent.  When the money goes directly from 529 plan to the school, the student is the "recipient" of the funds. You would show nothing on your taxes.

[cntgolf]

Thanks for this response. I have one son who claims himself on his taxes. I have another son who still lives at home but will start college this fall. How do I report the 529 distributions for the son who is still at home? Thanks. Clayton

[rob5234]

Rather than claiming the status of someone who COULD be claimed as a dependent by someone else (me) but would not be, my son mistakenly indicated he simply was not being claimed as a dependent … Changing on his return does not seem to change his tax refund but wondering if it will create problems for me when I file - though not claiming him as a dependent he is the beneficiary of a 529 account that I typically account for when I have claimed him as a dependent … Sounds like he may need to refile and include the 529 info on his return.

[ThomasM125]

He would only be taxed on the income from distributions from the 529 plan if he did not use the funds for qualifying education expenses. If he did, then he does not need to amend his return. He's not required to report the 529 income if it is not taxable.

[cgvillareal]

For our 529, my husband is listed as the account owner and our son the beneficiary. We had withdrawals from the 529 deposited into our checking account and then paid tuition, etc. Our son is no longer a dependent and will be filing his own taxes this year. How do we handle the "income" and "expenses" and not incur any taxes.

[Carl]

My daughter is 20 and earned 10,000+ last year. I have a 529 account for her...She is no longer my dependent, apparently.

"apparently" doesn't really count here when dealing with federal taxes. Your daughter's earnings do not matter here. If your daughter did not provide more than 50% of her own support for the entire tax year, then you the parent qualify to claim the student on your tax return, provided all the following conditions are met.

If the student:

- Was enrolled as a full time student for *any* *one* *semester* that started in the tax year and;

- Was enrolled in a course of study that will lead to a degree or credentialed certification and;

- Was enrolled in an accredited institution, and;

- did not provide more than 50% of her own support, and;

- was under the age of 24 on Dec 31 of the tax year and;

- is not filing a joint return where they are not reporting they can be claimed on someone else's return. (take note of the double negative here.)

take note in the above that the support requirement is on the student. There is no requirement what-so-ever for the parent to provide any support. Not one single penny. Additionally, scholarships, grants, 529 distributions, gifts from Aunt Mary, money from parents, etc. are all third party support and do not count for the student providing their own support.

On top of that, if the student "qualifies" as your dependent, (with only $10,000 of earned income for 2020, I'm 99.9% sure she does)  then your daughter must select the option for "I can be claimed on someone else's return". Your daughter does not have a choice on this.

You the parent do have a choice. You can claim her as your dependent, or you can choose not to claim her.

The 1099Q show's me as recipient and not her.

I think @MargaretL missed your comment about you being identified as the beneficiary recipient, or I totally misunderstood your comment, "The 1099Q show's me as recipient and not her." The 1099-Q is reported on the tax return of the person's whose SSN is shown in the "beneficiary recipient" box. No exceptions. Period.