question about 1099Q and 1098T

[matto1]

Help, I am a bit confused.

Both of my children are age 24 or older, so they are no longer dependents.

They both attended college or post-graduate last year. The institutions issued 1098T forms to each of them.

I took distributions from their 529 plans to help cover expenses, but (and this might have been a mistake), I took the distributions, so the 1099Q forms were issued in my TIN. 

For my older son's distribution, I took the $10,000 distribution for student loans, there's no checkmark in the 1099Q (I don't think there's a spot for it in the 1099Q), but I selected it. But I see no way in TurboTax to declare that's what I did, and as a result about $3307 is presently showing as taxable income.

How do I fix this? In particular, how do I declare that I used $10,000 to repay a student loan, and have it removed from my taxable income?

[AmyC]

A couple of options and a warning:

Option 1: 

1. Return to the 1099-Q entry. 
2. When asked "Who is the student/ beneficiary?" Select someone else and enter your son's name.
3. Keep going and look for Principal or interest payments on qualified education loans, enter $10,000

Option 2 - delete the 1099Q since it isn't taxable, keep your records in case the IRS asks. Since the 1099-Q was not income, it should not be entered. Tuck the 1099-Q into your tax folder. IRS Publication 970, Tax Benefits for Education states that nontaxable distributions should not be entered.

Warning: The 529 can be used for student loans up to $10,000 per lifetime. This means no further withdrawals are allowed for student loans for your son. If you as the parent have a PLUS loan, you can withdraw for that up to $10,000. You are allowed to roll the funds into a sibling account.

In addition, your state may tax the withdrawal as income.