I had my daughters 529 distribute an amount equal to the billed Tuition, Fees and Room and Board directly to the University. I didn’t take any other funds out of the 529 Account. After inputting the 1099Q and the 1099T (I added the Room and Board portions to those expense lines in addition to the 1099T expenses and the program indicated my daughter needed to add $2,300 to her income on her tax filing. If the amount distributed equals the qualified expenses there shouldn’t be taxable income to my daughter correct?
She did have $4,700 in earnings on her 529 account for the year but I didn’t think that growth was taxable.
Yes, be careful here, you may have exceeded qualified educational expenses. Make sure the 1099Q adds up to tuition plus qualified expenses, plus room and board (a qualified expense for 529). If she received scholarship or grants and uses some of that money on room and board in excess of the 529 it could become taxable. Especially, when Box 5 of the 1098T is more than Box 1 of the 1098T form. If not the case, the allocation may be wrong remember to distribute your 529 accordingly: