Educator Expenses

[Dodgerfan]

I am preparing a 2019 tax return for a married couple. Both are teachers and are deducting educator expenses of $250. Their son is the beneficiary of a State sponsored 529 plan. The plan is in the spouse's name and their son I. s the beneficiary. A distribution of $377 was taken in 2019. The 1099Q shows earnings of $154 and basis of $223. 

The Lacerte program is limiting the Educator expense deduction to $346.  The difference is $154 coincidentally. Is this correct or an error in the program?

[TaxGuyBill]

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@Dodgerfan wrote:

Both are teachers and are deducting educator expenses of $250.

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How much did they actually pay for the qualifying expenses?  Don't just enter $250 each, enter the amount they actually paid.

Otherwise, yes, it seems correct.  Although it doesn't make sense to me, tax-free distributions reduce the total expenses to be used for the Educator deduction.  But again, enter the actual amount that they paid, not just $250.

[BobKamman]

Most of us think of it as classroom supplies, but the $250 can also include "professional development courses related to the curriculum in which the educator provides instruction or to the students for which the educator provides instruction."  Apparently such courses can be paid from a Section 529 plan.  But there should be a way to show that the deduction relates to classroom supplies and not qualifying tuition.  Maybe it's called "override," but maybe the e-file police won't allow it.  

[qbteachmt]

I am posting mostly so that I am following this topic, but also, it seems like the name of the spouse on the account who also is trying to take their own deduction might be linked to that distribution, as if that was a reimbursement to that spouse, which would limit any further deduction.

[TaxGuyBill]

Ah yes, I looked it up and that makes sense that if the Educator Expenses were covered under the 1099-Q (or other exclusions) that amount does not qualify.  The son's expenses should not affect it.

[mwloomis]

Did you find a solution? I have the same issue.

[Dodgerfan]

It appears that since the spouse was the beneficiary of the 529 plan the educator expenses were limited by the amount of the earnings.  Any excess expenses are combined with other educator expenses. Although they are not deductible as itemized deductions on the Federal return, they are still deductible on most state returns.