1099Q is all basis

[Possi]

If the 1099Q is all basis, can I take the education credit for the education expenses paid for With That Distribution?

[BP.]

Yes, you can.

[KBTS]

I did not think the same expenses can be used for both benefits. Any qualified expenses paid by a QTP cannot also be used to claim a credit or deduction (TTB pg 12-6). Now in this case, since there are no earnings I guess there would not be any tax on the QTP distribution so it might not really matter?

[Possi]

Right, all basis

Right, it is all basis, so there isn't any math to do. The contributions were never tax deductible, AND there are no tax free earnings to negotiate.
Gracias!

[BP.]

did not think the same expenses can be used for both benefits. Any qualified expenses paid by a QTP cannot also be used to claim a credit or deduction

If there's a QTP distribution, still figure the eligible credits or the deduction FIRST, then see if that leaves any earnings from the 1099-Q as taxable. No earnings; nothing taxable. Depending on the figures, even if the distribution's earnings were to wind up as taxable, it can be more beneficial to take the education credit, and have some QTP earnings taxed. (And the QTP can be allocated for room & board.)

[Possi]

Like

If there's a QTP distribution, still figure the eligible credits or the deduction FIRST, then see if that leaves any earnings from the 1099-Q as taxable. No earnings; nothing taxable. Depending on the figures, even if the distribution's earnings were to wind up as taxable, it can be more beneficial to take the education credit, and have some QTP earnings taxed. (And the QTP can be allocated for room & board.)

I wish we had a "like" button.


Thank you for CLARITY... you always do make cloudy topics, clear.

[BP.]

Thanks!
I wish I could make it less cloudy to one particular client. She was practically in tears to learn a few bucks of her QTP earnings might be taxable. ("But I've been saving for my baby's college for years!!")

And I still can't get the room and board figures from her to make all the taxability go away, because she keeps running into language from the school that "room & board are not eligible for the credit."
Right, they're not. We are not using them to figure a credit.

[Possi]

Explaining it to them

My one client will bring all her expenses. So thankful she understands.

These can be very confusing where the tax credits meet the 1099Q distributions. There is no place anywhere that answered my original question. I knew in theory, how it should work, but needed to be confirmed. I read and read. The IRS can make the most simple thing difficult.

And, if I "overthink" it, that's when my ship sinks! LOL