1098-T and 1099-Q

[Summit1]

Taxpayer received a 1098 T which was entered into the return. Student was a Graduate student in 2021 and received a $2000 Lifetime Learning Credit. After return was completed ( but not filed ) the Taxpayer received (2) 1099-Q's. I have entered the information from both 1099-Q's and it has increased his taxable income. 

I have read that if the distributions are used for qualified education expenses then they would not be taxable. Am I missing something or is the fact he received qualified expenses on the 1098-T causing the increase in taxable income.

[ajp]

It isn't automatically applied. 

Go to the form 1099-Q entry page and scroll down to the bottom.  You will see two columns.  See how they show what is being applied to qualified expenses, and what isn't?  You will need to make sure they are being applied.  Otherwise they will be taxable.  

On part 8 of the student information section, you should be able to apply them.  

[TaxGuyBill]

After using $10,000 of expenses for the Lifetime Learning Credit, are there enough qualified expenses left over for the full amount of the 1099-Qs?

[Summit1]

total distributions on 1099-Q's are $5946.00 with only $3599.00 remaining after using $10,000.00. Based on the form Taxable Income increased by $1634.00.