Education Expenses

[IndexCard]

My daughter was a senior in  college in 2022 and attended school from January 2022 through May 2022. 

she plans to claim herself on her tax return for 2022, so she would not be our dependent for the first time.

Would I enter on our return any amounts paid for her education whether from a 529 account or our checking account?   We received one 1099Q with her name on it fpr $15,130  and one 1099Q  that has my name on it (as parent) for $9,063.55  

[KrisD15 · Accepted solution]

The student will apply for an education credit if applicable using her 1099-Q and 1098-T. 

You are responsible for the tax (if any) from the distribution taken in your name. 

If you and the student agree, she can lower the expenses she claims by the amount of your distribution which would make your distribution Tax-Free. 

Tax-Free distributions are not reported on a tax return, so simply do not enter the 1099-Q into the program. Keep the 1099-Q and the receipt for the matching expenses (whether tuition or Room and Board) with your tax file. 

Make sure the student does not use the same expenses for her distribution or scholarships. (If she is applying for a credit, have her report the additional assistance, in the amount of your distribution, in the "Expenses and Scholarship" section under Deductions & Credits)

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.”

[IndexCard]

thank you for the clear answer.  

I don't know if it matters, but all of the 529 withdrawals were used for our daughter's college expenses.  Initially, we moved money from the 529 into our checking and then within 1-3 days paid tuition1099Q with my name on it.

To make payments easier, we then gave my daughter access to the 529 account and she then could withdraw funds to pay costs.  She received a 1099Q for the funds she withdrew. 

She filed her own return this year, and I did not claim her as a dependent.  Neither of us received any tax benefits, credits etc related to college education expenses.  She was a student from January - the beginning or middle of May 2023 then graduated.

[SharonD007]

The 1099-Q should be reported on the tax return of the person whose SSN is on the form and it only needs to be reported on the tax return if the withdrawal is more than the tuition paid in Box 1 of the 1098-T plus other adjusted qualified educational expenses. In that case, the earnings on the excess distribution would be taxable income. To find out what are qualified educational expenses, please review the Guide to Tax Form 1098-T: Tuition Statement and the IRS link on Qualified Education Expenses.

To determine if you need to report the 1099-Q, add up the tuition paid from the 1098-T in box 1 plus the qualified education expenses and subtract any scholarships if applicable. If the total is more than the amount in box 1 of the 1099-Q, you do not need to report it.  If the total is less than the amount in box 1, some of the earnings in box 2 of the 1099-Q will need to be report the 1099-Q on your child’s tax return as ordinary income and they will pay an additional 10% penalty tax as well on that amount.  TurboTax will ask you questions as you enter the 1099-Q and make the calculations. The gain is not reported, if it was used for qualified education expenses.