Entering 1099-Q and scholarship refund

[dasdirector]

Hello,

I reported a 1099-Q distribution for my son’s qualified tuition program expenses, as he is a dependent. However, the university later refunded 25% of the amount due to a scholarship.
 
Even though I indicated that not all of the original distribution was used for expenses, the system did not prompt me to adjust or enter a taxable amount. Where should I report the refunded portion, and will it be subject to taxes?

Note - I did not receive a form 1098-T from the university

SK

[AmyC]

It depends. First, we have to determine if you actually have a taxable portion

• If all of it was used for 529 qualified Room and Board  and Qualified Education Expenses - Internal Revenue Service, then none of it is taxable. Note, kids at home have room and board, maybe internet expenses also.
• If you really don't have enough allowed expenses, then you will have a taxable portion. 

Second, if you have a taxable portion:

Reduce the amount of qualified tuition to create the taxable portion. The amount will vary based on your qualified expenses from the first bullet. 

I suspect it isn't taxable since the amount must have been low enough to not get a 1098-T. Unless, it isn't qualified tuition and it is all taxable. Tuition must be paid to an  Eligible Educational Institution - Internal Revenue Service.

[dasdirector]

Thanks!