I was having a tough time reconciling the fact that I took qualified distributions to pay for my child's college, but eventually wound up with a taxable amount when I entered the 1099-Q and 1098-T forms into Turbo Tax.
I thought the 1098-T had undercounted what I was actually spending on the college and found that these institutions do not count room and board as qualified tuition and related expenses (QTRE) for the 1098-T, even if provided by the school. Then, if you look at the information on 529s and distributions, you find conflicting information, namely that room and board is a qualified expense from the 529 plan.
Why does Turbo Tax seemingly want you to net these two out on the worksheet? Shouldn't there be a way to include room and board to net out distributions with actual qualified expenses in the software in order to determine any taxable amounts? Instead, it seems that Turbo Tax just runs users down this path of entering the 1098-T and 1099-Q alone, without adding any other qualified expenses, and nets them out, and it appears then it overstates a user's tax liability if the amount nets higher.
I'll add one more point to this - neither form is required for tax filing and the 1099-Q only comes into play if there are unqualified distributions.
So why does Turbo Tax force us down this path with it's software? Shouldn't there be a way that Turbo Tax can allow for actual qualified expense to be entered. Shouldn't there be a way to remove any overage amounts (through the step-by-step, not just an override) if it is indeed a worksheet and the forms do not need to be included?
Am I understanding this correctly?
