Entering contributions to Qualified Tuition Programs 529 Plans in ProConnect Tax

where do i enter 529 contributions in turbotax

@Rayw You state that «If your state is one of those states that has a 529 plan deduction, TurboTax will prompt you to enter your 529 contributions when you get to the credits/deductions portion of your state tax interview.» Your contributions to a college savings plan function somewhat like an Individual Retirement Account. In a college savings plan, the investments you choose are subject to market risk with no guarantee that it will increase in value. If your state is one of those states that has a 529 plan deduction, TurboTax will prompt you to enter your 529 contributions when you get to the credits/deductions portion of your state tax interview. Your contributions to a college savings plan function somewhat like an Individual Retirement Account. If your state is one of those states that has a 529 plan deduction, TurboTax will prompt you to enter your 529 contributions when you get to the credits/deductions portion of your state tax interview.

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All the numbers will be entered at the 1099-Q section  (not the education expenses section) because the beneficiary is not your dependent. Form 1099-Q lists the total distributions from a 529 plan or Coverdell ESA during a given calendar year, regardless of how the beneficiary or account owner spent the funds. Typically, Box 1 of Form 1099-Q lists the total distribution, Box 2 includes the earnings portion of the distribution, and Box 3 includes the basis, which is the contribution portion of the distribution.

In some cases, you can also pre-purchase room and board expenses. State governments typically guarantee investments in pre-paid tuition plans, and require either the owner or the beneficiary to be a resident to benefit from the plan. Your contribution isn’t tax-deductible on your federal return, but two-thirds of the states do offer an income-tax deduction for contributions. Most require that you contribute to your own state’s plan to get the break (Arizona, Kansas, Maine, Missouri and Pennsylvania allow deductions for contributions to any state’s plan). But each state also has different rules about who can take the deduction for their contributions. Many states, such as Ohio, let residents deduct their 529 contributions to the state’s plans even if they are not the account owner.

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When you use 529 plan funds to pay for qualified education expenses, there is usually nothing to report on your federal income tax return. Form 1099-Q and Form 1098-T will list the amount of the 529 plan distribution and how much you used to pay for college tuition and fees, but it is up to you, the 529 plan account owner, to calculate the taxable portion. When the student is ready to use the funds for school, you can make tax free withdrawals up to the amount of qualified education expenses. College savings plans typically have fewer limitations in terms of the age or residency of the account owner or beneficiary and does not restrict your use of the funds to schools within your state.

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  • When the student is ready to use the funds for school, you can make tax free withdrawals up to the amount of qualified education expenses.
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  • Since the credit is more generous; use as much of the tuition as is needed for the credit and the rest for the interest exclusion.
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Subject to the options available in your specific plan, you can choose where to invest the money in the account. If you are willing to pay taxes and penalties, you can even reclaim the balance of the account at any time without your beneficiary’s permission. With a 529 plan, the owner remains in control of the plan, and the beneficiary or student has few, if any, rights. As the owner of a 529 plan, you have the ability to change the beneficiary of the account at any time, and you can choose where and when to make distributions from the account. However, some states let you deduct all or part of your 529 plan contributions.

where do i enter 529 contributions in turbotax

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For example, Form 1098-T does not include room and board costs, computers and internet access, K-12 tuition, student loan repayments, or costs of apprenticeship programs. It’s up to the beneficiary and their parents to save receipts and calculate the total amount of qualifying 529 plan expenses during the tax year. As with the AOTC and LLTC, the tax penalty is waived only to the extent of the qualified expenses that justified the tax-free educational assistance. However, if you are age 70 or older on or before Dec. 31 of the taxable year, you may deduct the entire amount contributed during the taxable year.

When the Form 1099-Q is issued to the 529 plan beneficiary, any taxable amount of the distribution will be reported on the designated beneficiary’s income tax return. This typically results in a lower tax obligation than if the Form 1099-Q is issued to the parent or 529 plan account owner. When the total 529 plan distribution exceeds the AQEE, the excess amount will be subject to income tax on the earnings portion of the withdrawal. However, the 10% penalty is waived when the non-qualified distribution occurs due to the tax credit adjustment up to the amount of the qualified expenses that justified the tax credit. 529 plan distributions used to pay for non-qualified expenses are subject to income tax and a 10% penalty on the earnings portion of the withdrawal.

In particular, it may be better for the student to declare some of his scholarship as taxable rather than you paying tax on some of your Q earnings. If he has no other income, the first $12,400 of taxable scholarship is covered by his standard deduction. So when TurboTax calculates my tax liability, it thinks I only need to pay taxes on the earnings portion of $9677, instead of on the earnings portion of $13,500. If I could get TurboTax’s ESA/QTP Wks to start with the distributions from both 1099-Qs, I believe the numbers would work out properly. But I’m concerned about overriding form values, as that might disqualify my return from being electronically fileable.

If the distribution is subject to the 10% penalty tax, the additional tax must be reported on Schedule 2 (Form 1040), line 6, or Form 1040NR, line 57. The purpose of entering the tuition, then off setting it with scholarship («tax free assistance») is so TurboTax (TT) will know to not  calculate the 10% penalty, if some your distribution ends up taxable. There is a penalty exception for when expenses that coulda been use for a 529 distribution were used instead for the tuition credit and/or were covered by scholarship. TT has to prepare form 5329 to claim the penalty exception. You can and should claim the tuition credit before claiming the 529 plan earnings exclusion.

The Turbo Tax page for Virginia State Taxes only asks if I want to START a contribution and if I say No returns me to the main page. For Virginia, how do I enter all the contributions I have made to our 529 accounts for our 3 kids. All features, services, support, prices, offers, terms and conditions are subject to change without notice.

Only the owner of record for an account may claim a deduction for contributions made. If you contributed more than $4,000 per where do i enter 529 contributions in turbotax account during the taxable year, you may carry forward any undeducted amounts until the contribution has been fully deducted. However, if you are age 70 or older on or before December 31 of the taxable year, you may deduct the entire amount contributed during the taxable year. Suppose the beneficiary receives a tax-free scholarship, fellowship grant, Veteran’s educational assistance, employer-provided assistance, or other tax-free educational assistance.

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