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    1099q

    Client's daughter received a 1099Q, which was disbursements for her 2017 college education. The college bill came and the family disbursed the funds accordingly.
    So the bill was 15,000.00 for the year and the disbursements from the 1099Q was exactly for that amount.
    Mom and Dad are going to take the American Opportuntity Credit.
    Am I correct that when I calculate the 1099Q do I deduct from the daughters qualified educational expense the payment of $4,000.00 that mom and dad are taking as a credit on their return . Making her net college payment $11,000.00
    which will make her have a little bit of a payment on her return.
    Daughter does not have any expenses for books or room and board.
    Many thanks,

    #2
    Just did one of these

    I just did one of these and that was my understanding of how this is done as well. Reduce the qualified education expenses by the $4000 AOC credit then calculate the taxable portion of the distributions on the 1099Q. Calculation is Earnings x (adjusted expenses/gross distribution) = Tax free earnings
    Earnings - Tax free earnings = Taxable earnings Taxable earnings to be reported on line 21 of dependents return.

    IRS Pub 970 has some good explanations as does TTB pg 12-5 to 12-7. I found the calculation explanation easier to follow in TTB than Pub 970-works out the same either way.

    Have fun explaining to TP!

    Would also see if anyone else has had experience with this...

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      #3
      One Omission

      Room and Board count as qualifying education expenses when dealing with the 529. R & B need to be added to the $15,000 before you subtract the $4,000.

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