1099-Q

[MarilynG1]

No, you can only deduct payments actually made in 2021 for Education Expenses.

However, if the entire distribution on your 1099-Q was used for Qualified Education Expenses, you don't have to enter it in your return, so need need to worry about the 1099-Q distribution exceeding what it reported as 'Tuition Paid' on the 1098-T. 

Click this link for more info on Form 1099-Q. 

[MarkWiz72]

So you're saying I only have to enter what we actually paid for tuition, fees, and room & board for 2021 and not worry about reporting was actually distributed on the 1099-Q (which was Fall 2021 and Spring 2022)? Earlier in the string I was told to enter all info for the 1099-Q and the 1098-T and let TurboTax calculate from there, so you can see why I'm confused.

[AmyC]

Please see my 529 example with IRS information here. You can enter the 1099-Q but it is not required when conditions are met. As for the tuition, the laws have changed and amounts paid during the year are deemed as qualified expenses. See page 12, What Expenses Qualify 2021 Publication 970 - Internal Revenue Service to verify your ability to claim all tuition.

Depending on your income, you may be able to qualify for the AOTC. If necessary, you could push some income to your daughter. Depending on her income, it may not be taxable at all. The standard deduction for a single is $12,400 so only income above that is taxable to your daughter.  I am also going to recommend you look at another of my answers for help.

AOTC  eligibility

$80,000-$90,000

$160,000- $180,000 MFJ

While Turbo Tax can calculate what you put in, you can see that moving numbers around to what is most beneficial is best, allowed and IRS recommended.

[MarkWiz72]

I just read this on your site for the 2021 tax year as well: "Interest on earnings in other plans you can use to save for college, including Coverdell Savings Accounts and 529 Education Savings Plans, is not taxable if you use the money to pay for higher education expenses. College expenses you pay from either of these plans aren’t eligible for the American Opportunity or Lifetime Learning credits."

So if I'm entering my 1099-Q info to list distribution and entering all tuition and room & board expenses, why is my daughter still qualifying for the American Opportunity credit?

[AmyC]

Expenses paid for with the 529 are not eligible for credit. However, money paid out of pocket IS eligible. Example:

• $20,000 tuition,
• $20,000 529 disbursement. 
• But half of the 529 money goes to room and board. This leaves $10k paid out of pocket to qualify for the credit.

[MarkWiz72]

According to what I've read and what your pros have told me, 529 a distribution CAN cover room & board (see earlier in this string from ThomasM125)

[AmyC]

Yes, I gave the link earlier to Publication 970, Tax Benefits for Education. which explains how 529 covers the room and board. The 529 expenses do not count towards a tax credit but do keep you from having taxable 529 income. You have moving parts.

1. You want the 529 income to not be taxable to you.

2. You want education credit if possible. That may mean making some scholarship or 529 taxable to the student.

If all of your 529 goes towards room and board and tuition, it is not taxable and does not qualify for tax credit.

If you have up to $4000 paid out of pocket (not 529) for tuition, and your income is within the limits I posted above, then you would get education credit.

[taxTimeAlready_]

Hi,

I pay out of pocket for my daughter's education but get reimbursed from the 529.  I mistakenly pulled out too much money from the 529 in 2021.  I have not done a very good job of pulling out money evenly over the last 4 years, so I can easily make the argument that what I pulled out over 4 years is less than tuition, room and board over the last 4 years.

The question that I have is: In order to reduce the amount of tax I owe for 2021, can I add the tuition costs for 2022 Spring that I paid in Jan'2022?

Thanks.

[PattiF]

No, unfortunately, you cannot use the tuition costs for Spring 2022 that were paid in 2022 as an expense for the tax year 2021. Taxpayers are cash-basis who for income tax purposes, report income as it is received and expenses as they are paid.