Line 2g is 3,666 which I think should be divided by the QTP distribution (5,750). However, TT has a Line 2h, that is 5,750 meaning the fraction would be one and the QTP earnings would not be taxable. This does not jive with my understanding of Publication 970 by the IRS.
Please clarify-
Are you reporting a 1099-Q? If so, was the 1099-Q issued to you?
Are you the student?
Were the funds used for education expense?
Did the student receive a scholarship?
Are you getting an education credit?
Please clarify-
Are you reporting a 1099-Q? If so, was the 1099-Q issued to you?
Yes, the info is from a 1099-Q. It was issued to me, the student.
Are you the student?
Yes, I am trying to calculate my own taxes.
Were the funds used for education expense?
The funds were used for QTP QEE - tuition, mandatory fees, required books, and qualifying room and board.
Did the student receive a scholarship?
Yes. The tax-free portion is $7,450.
Are you getting an education credit?
My mom claimed me as a dependent and plans to claim the AOC for $2,500.
QEE for QTP = $15,116
Expenses used for AOC = $4,000
Tax Free Scholarships and Grants = $7,450
QTP distributions = $5,750
Adjusted QEE = $15,116 - $4,000 - $7,450 = $3,666
Earnings on QTP Distributions (Box 2 of 1099-Q) = $703
$703 - ($703*($3,666/$5,750)) = $254.79 taxable income per QTP Earnings
TT's worksheet includes a line I don't see in Publication 970. It is 2h - Adjusted Qualified Higher Education Expenses Applied. I think because of this line, TT is calculating the total QEE attributable to this QTP distribution as the full $5,750 rather than $3,666. I don't understand why.
This calculation enables TT to exclude amounts as taxable income on Schedule 1. But I feel I should have taxable income from this QTP distro earnings.