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giogis245

1099-Q, where to enter?

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Client took out money from Qualified Education Program under section 529.  He took out a total of $25,500, and he received form 1099-Q which has the gross distribution, earning and basis.  Some of the money was used for education and some was used for the purchase of his house.  Where do I enter this?

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Oh, you split it ALL out.  Gross, basis, what was spent for qualified ed exp's.  Make sure you take a look at the possibility of using *taxable* portions of the proceeds to qualify for ed credits; often worth far *more* than tax savings on earnings.

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I put the earnings in the Line 21 worksheet.  Then input qualified ed expenses up to that amount as a negative amount at the bottom of the worksheet.

 

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But I'm not sure we're there yet:

https://www.irs.gov/publications/p970/ch08.html#en_US_2016_publink1000178534

Taxable earnings.   Use the following steps to figure the taxable part.

  1. Multiply the total distributed earnings shown on Form 1099-Q, box 2, by a fraction. The numerator (top part) is the adjusted qualified education expenses (AQEE) paid during the year and the denominator (bottom part) is the total amount distributed during the year.

  2. Subtract the amount figured in (1) from the total distributed earnings. The result is the amount the beneficiary must include in income. Report it on Form 1040 or Form 1040NR, line 21.

Just remember to include room and board in the AQEE.

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6 hours ago, Abby Normal said:

But I'm not sure we're there yet:

https://www.irs.gov/publications/p970/ch08.html#en_US_2016_publink1000178534

Taxable earnings.   Use the following steps to figure the taxable part.

  1. Multiply the total distributed earnings shown on Form 1099-Q, box 2, by a fraction. The numerator (top part) is the adjusted qualified education expenses (AQEE) paid during the year and the denominator (bottom part) is the total amount distributed during the year.

  2. Subtract the amount figured in (1) from the total distributed earnings. The result is the amount the beneficiary must include in income. Report it on Form 1040 or Form 1040NR, line 21.

Just remember to include room and board in the AQEE.

Ah, very good.  Sorta like the ole exempt savings bond Interest and education expenses deal. 

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