529Plan and 1099-Q

[529parents]

I paid for my son's college tuitions since 2019 and all were direct ACH from my bank account.  I also paid for his boarding and room which I transferred money to his bank account and he could pay the rent.

I made distribution from the 529 plan last year to cover the 3 years college tuitions and boarding expenses.  I was the recipient of the distribution.

I received a 1099-Q for 2022.  I entered Box 1 and Box 2 on the 1099-Q on my tax return.  However I was taxed for the earning on Box even though I believed all this is a qualified distribution.  If I claim my son as dependent, I cannot find a place in turbo tax to claim the qualified tuitions and boarding expenses.  If I do not claim my son as dependent, I could be able to enter the beneficiary name and claim the expense.  But this is causing issue on my CA tax return and I could efile the CA state tax return.

Any advise please. 

[529parents]

correction for above. 

 If I do not claim my son as dependent, I could be able to enter my son as the beneficiary and claim the expense.  But this is causing issue on my CA tax return and I could not efile the CA state tax return.

[SharonD007]

You only need to report the 1099-Q if your 529 Plan distribution exceeds your dependent’s qualifying educational expenses. The earnings on the excess distribution will be reported as Other Income on your tax return.

You indicated that your distribution in 2022 was for expenses paid in 2022 and previous years. If that is correct, then you have an excess withdrawal. You must take the 529 Plan distribution in the same calendar year as you paid the educational expenses. 

If you are claiming your son as a dependent, enter your son’s 1098-T and TurboTax will prompt you to enter the educational expenses. You may also qualify for the Lifetime Learning Credit or the American Opportunity Tax Credit as long as it is not for the same expenses that the 529 Plan was used for. For example, If the 529 Plan withdrawal was $5,000 and the tuition and qualified educational expenses are $10,000, you can claim a $1,000 lifetime learning credit on $5,000 of expenses, and the qualified expenses on your 529 plan will be reduced by $5,000. If you decide not to claim him as a dependent, you still have to report the 1099-Q on your tax return (if the distribution exceeds the educational expenses) if it has your SSN on it. 

Please review the TurboTax articles What is IRS Form 1099-Q? and Guide to IRS Form 1099-Q: Payments from Qualified Education Programs for further information on 529 Plan withdrawals.

Please see the TurboTax articles Guide to Tax Form 1098-T: Tuition Statement and What Are Education Tax Credits? for information on educational expenses and education tax credits. 

If your son files a tax return, make sure he checks the box indicating that someone else will claim him as a dependent.