My daughter Audrey graduated in 2015 and began paying loans. My wife and I took the American Opportunity education credit while she was in school. Part of Audrey's education was paid by a Scholars Choice QTP fund which was set up by her aunt and uncle in her own name. After graduation (2015) there still remained money in that 529 state plan. In 2017 the aunt had the funds distributed directly to Audrey, with these details on the 1099-Q: (box 1 distribution) $7050 (2 earnings) minus (-) $2199 (3 basis) $9250. From that distribution, Audrey immediately paid off the full balance of her student loan, $3162. The remainder went into her savings account. Box 2 'earnings' is a negative number, and the tax is supposed to be paid on the earnings - so possibly she does not need to report this at all.

At the least, we think she should be able to deduct the $3162, but are not sure where to enter that amount. We have already entered the $51 in student loan interest for 2017. Audrey is single, not a student, made $30k per year, with no other tax situations. Normally she would get a refund. THANKS. C