![]() If the beneficiary has a disability, certain special needs services and equipment needed for enrollment or attendance may qualify.Now account owners can reimburse themselves for a laptop and printer without a worry. This is a recent change from the 2015 PATH Act for the benefit of 529 account owners, whereas previously the school had to specifically require these items. Computers, peripheral equipment, computer software, and internet access charges are all considered qualified expenses.The beneficiary must be enrolled at least half-time for room and board expenses to qualify regardless of whether they are on- or off-campus. So, if the total cost living off-campus exceeds the school’s allowance, the student would have to pay the difference using funds from another source. To be considered qualified, these costs must be less than or equal to the room and board allowance from the college’s cost of attendance figures (provided by the school example) or the actual amount charged by the school if living in on-campus housing. Room and board, which includes the costs of rent (whether living on or off-campus), and food.If a fee is not required by the school, such as drama club fees, it would be considered non-qualified. They are grouped because these are all expenses that must be required by the school for enrollment or attendance at the institution. Tuition, fees, books, supplies, and equipment are all qualified expenses.Publication 970 - Tax Benefits for Education Note: This is a guide to entering qualified education program payments into the TaxSlayer Pro program. Taxable Education Program Payments (1099-Q) - For a MFJ return, note if the 1099-Q is for the taxpayer or the spouse and enter on the appropriate line the Box 1 and 2 amounts along with the adjusted qualified education expenses.To enter Qualified Education Program Payments in TaxSlayer Pro, from the Main Menu of the tax return (Form 1040) select: expenses on which the American Opportunity Credit or Lifetime Learning Credit was basedįor a QTP: it is the qualified education expenses less tax-free educational assistance.īox 2 earnings minus ( ( Adj Qualified Education Expenses / Box 1 distribution ) x Box 2 earnings ).expenses deducted on Schedules 1, C, or F.expenses paid for with tax-free educational assistance, e.g., grants and scholarships.What are Adjusted Qualified Education Expenses?įor a Coverdell ESA: It is the qualified education expenses less: IRS Publication 970 provides separate details for the expenses that qualify for a Coverdell ESA here and a QTP here. The institutions include elementary, secondary, and postsecondary, and the list of expenses includes among other things tuition, books, fees, room and board, and computer equipment. In general, qualified education expenses are the expenses required for a designated beneficiary to enroll at or attend an eligible educational institution, and the student must be enrolled at least half-time. The student beneficiary was changed to someone not in the same family.The distributed funds were not used for qualified education expenses.When Would the Earnings In Box 2 Be Taxable? (See sections 408(e)(2) and 408(e)(4) for similar rules that apply to a CESA.) Payments to a decedent's beneficiary, including an estate. Withdrawals of excess CESA contributions and earnings, with the earnings taxable in the prior year.ĭistributions made after the recipient was disabled. Withdrawals of excess CESA contributions and earnings, with the earnings taxable in the same year.Įxcess contributions plus earnings taxable in the prior year (Note: A withdrawal indicated with code 2 or 3 is not considered a distribution.)Įxcess contributions plus earnings taxable in the current year Otherwise the excess distribution may have to be included in Other Income on Form 1040, and there may also be an additional tax on the amount included in income, reported on Form 5329.įorm 1099-Q Box 6 Distribution Codes (if reported) Distribution Codeĭistributions (including transfers) to the recipient and any direct payments to a qualified educational facility. The distribution is normally not taxable if it was used to pay for qualified education expenses, if it was transferred between trustees, or if it was rolled over into another qualified program within 60 days. Gross distributions from a 529 or a Coverdell ESA reported in Box 1 include both earnings (reported in box 2) and basis (reported in box 3). ![]() If the taxpayer used all of the funds distributed for qualified education expenses, nothing needs to be reported on their federal income tax return. ![]() It's up to the taxpayer to determine if any of the distribution is taxable. A taxpayer will receive Form 1099-Q if they received a distribution from a qualified tuition program (QTP) under section 529 or a Coverdell education savings account (CESA).
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