Entering 1099-Q on dependents return

[Summit1]

Dependent on parents return is a student. 1098-T has been entered on parents return but income is too high for education credit.

student had W-2 income and a 1099-T. Student is the recipient & the designated beneficiary. I have entered the same way I did in 2024 and it was not taxable. In 2025 it is putting in taxable income and I don’t understand why.

Any suggestions?

[dascpa]

Claiming the credit is not a choice of who gets the better deal. If the student qualifies as a dependent of their parents, they do not qualify for the AOTC or Lifetime Learning Credit whether they have W-2 income or not.

Therefore in most cases the 1098-T and 1099-Q do not go on the dependent's return.

However, if the 1098-T contains scholarships for things other than qualified tuition, books, and certain other small items, like room and board, then the 1098-T does go on the student's return as unearned income subject possibly to the Kiddie Tax.

The 1099-Q also goes on the parents return. The only time we have issues here is if the distribution is greater than the qualified tuition. Then you need to fill in what was used for room, board, computers, books, etc.  

You said the parent's won't get a credit, but be careful, the Student Education Worksheet may throw $10,000 or some other number in the "used for credit" column. If it does, it will generate taxable Other Income. You have to change the $10,000 or other to -0- to get the income removed.

[Terry53029]

I disagree with @dascpa If parent is eligible to claim student, but does not then student can claim norefundable education credits if student otherwise qualifies I have done it many times, but be sure student puts on their return they can be claimed by parent, but parent is not claiming. As far as the 1099Q, if is all used for qualified education expenses it does not have to be put on anyones return.

[dascpa]

From the law - Turbo Tax Support .......

Yes, a dependent child can claim the American Opportunity Tax Credit (AOTC) if their parents' income is too high to qualify, but the parents must not claim the child as a dependent on their tax return. If the student claims the credit themselves, they must file their own tax return, check the box that they are not a dependent, and use the credit to offset their own tax liability.

i stand partially corrected. 

[Terry53029]

@dascpa the box must be checked can be claimed as dependent

[Terry53029]

@dascpa If the student does not check box someone can claim them then they would be eligible for the refundable portion of the AOTC, and they are not eligible to do that if they can be claimed by their parents, but are not being claimed so they would then be eligible only for the nonrefundable AOTC