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taxdummy1
New Member

college 529 savings accounts

Last year I used TurboTax Deluxe. I had an issue where my daughter's school listed her 529 money as scholarship money on the 1098-T.  There was a place where I could list her 529 money as income listed elsewhere but it would not give me the option of entering the 1098-T, only a 1099.  Does anyone know if TurboTax Premiere would solve this issue?

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1 Reply
KrisD15
Employee Tax Expert

college 529 savings accounts

The process has not changed from last season. 

Both Form 1099-Q reporting distributions, and Form 1098-T, reporting expenses charged and payments received by the school, can be entered into the "Education" section under Deductions and Credits.

 

The school should not list funds from a 529 account as Scholarships or Grants in Box 5. The amount would be included in Box 1 if the funds were sent directly to the school.

 

There may be more to your situation, but I might assume that if the funds were sent directly to the school, Form 1099-Q would be sent to the student. In this case (where the distribution is sent to the school) the distribution is treated as if made by the student, as it should. 

I assume you are the account owner, but the student is the beneficiary. Distributions made by the student or sent to the school are reported on Form 1099-Q in the student's name and social security number. If the distribution is used for education expense, there is no need to enter the 1099-Q on anyone's tax return. 

Remember that expenses paid with distributions cannot be used towards an education credit. 

 

Education credits can be complicated and there are situations where it is more advantageous to claim distributions in order to free-up expenses. If that is your concern, please post another question. Pub 970 also does a good job explaining the credits. 

 

However, if you are only concerned about reporting distributions that were used for education expense, and therefore tax-free, simply do not report them.

 

According to the IRS:

"Generally, distributions are tax free if they aren't more than the beneficiary's AQEE for the year. Don't report tax-free distributions (including qualifying rollovers) on your tax return."

 

*AQEE = Adjusted Qualified Education Expenses.

 

 

 

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