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Old 03-16-2014, 10:58 AM
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529 plan

I have a 529 plan with my son as the beneficiary, Received a 1099-Q and 1098-T, both in my sons name. I would like to find out if I can claim the earnings from the 529 so I would be able to take advantage of the tuition deduction.
Thanks



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Old 03-17-2014, 04:43 AM
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Quote:
Originally Posted by kdpowell01 View Post
I have a 529 plan with my son as the beneficiary, Received a 1099-Q and 1098-T, both in my sons name. I would like to find out if I can claim the earnings from the 529 so I would be able to take advantage of the tuition deduction.
Thanks
If you contribute to such a plan, you cannot deduct your contributions from your federal income tax. However, you may be able to claim deductions on your state tax return;States vary in the amount of deductions they will allow on section 529 plans, so you must check with your state's guidelines. In general, you must invest in your own state's plan to qualify for deductions, though Kansas, Maine and Pennsylvania allow state income tax deductions no matter where the money is invested



the advantage with having the check made payable to the student is that the Form 1099-Q reporting the distribution to the IRS shows the student's name and Social Security number. If the student incurs qualifying higher education expenses, during the calendar year that are equal to, or greater than, the gross distribution figure on Form 1099-Q, the distribution is tax-free. And when all 529 plan distributions in a year are tax-free, nothing is shown on the student's Form 1040. The IRS can always "audit" the return, but in the vast majority of cases will simply assume the 529 earnings were properly excluded.

If the check from the 529 plan is made payable to the account owner, guess it is you, the process is different even if the end result is the same. This time, Form 1099-Q is issued with your name and Social Security number. In addition, a box on the Form 1099-Q is checked, indicating that the "distributee" is someone other than the beneficiary. Even if the distribution is entirely tax-free, that is the account beneficiary incurred sufficient qualified expenses during the year, the IRS is likely to issue a notice to the account owner when it sees nothing reported on yourForm 1040. you now have to respond to the IRS and justify the exclusion of earnings.



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