Recently divorced couple with dependent child in college, one is owner of 529 plan. The other decides to claim the child for educational benefits per the 1098-T.

[Richard1024]

Divorced couple with dependent child in college.  In 2017, they filed married filing jointly claiming all the educational benefits and credit as well as the benefits of a 529 plan.  The wife had been paying into a 529 plan which was used for the daughters tuition.

The couple divorced end of 2017, husband decided to claim daughter and the benefits associated with the 1098-T.  However, the wife as the owner of the 529 plan received the 1099-Q and since she is not claiming the daughter, I'm thinking will have to pay taxes on the earnings (due to not claiming child as a dependent on her return).  

As the husband already filed his return, it is probably best to have him amend and give the dependent claim to his wife so that those 1099-Q earnings aren't taxable?

Where would you report the 1099-Q earnings if the husband keeps child as dependent?

[sjrcpa · Accepted solution]

Was 529 plan money used for qualified education expenses?

[Richard1024]

Yes the money was fully utilized for educational purpose.

[Just-Lisa-Now-]

Fill out the 1099Q and you'll see a button at the bottom for Other Student if the TP isn't claiming the student as a dependent.

[Just-Lisa-Now-]

or you let mom claim the income

[Richard1024]

Thanks so much for your assistance on this.  It worked!  The only thing I noticed, not sure if you have ever encountered this but after entering all the information as indicated, the program is disallowing the $250 educators deduction.  The 529 plan is a state sponsored plan.

I'm checking my inputs to see if I may have missed something but not sure why that specific deduction would be disallowed.

[rbynaker]

That happens.  No idea who wrote that into the law, one rarely has anything to do with the other.

https://www.irs.gov/taxtopics/tc458

"Qualified expenses are deductible only to the extent the amount of such expenses exceed the following amounts for the tax year:

Any distribution from a qualified state tuition program that you exclude from income"