kbmoose1
I'm wondering if I made an error in my daughter's taxes. Maybe someone out there can tell me.
My daughter is a sophmore in college in another state. She had some (not a lot) income in 2005.
I opened a 529 with her as beneficiary 4 or 5 years ago. Late last year, I made a withdrawl from the 529 to pay some of her college expenses.
A 1099-Q reflecting the withdrawl came with her name on it in January.
When I did our taxes for using Turbo Tax, I was asked if there was a 1099-Q with my name on it. 'NO'
When helping her with her (Federal) taxes using Turbo Tax, the same question arose - "YES". Then the 529 'earnings' showed up as taxable on her return. It cost her a few dollars (which I paid).
I keep reading that 529s are 'tax-free', but went over this several times and can't see a way to not be taxed. She has more in the 529, and her little sister has a nice 529 too. So this issue will come up again next year.
Have I missed something or is the 529 taxable in this case?
My daughter is a sophmore in college in another state. She had some (not a lot) income in 2005.
I opened a 529 with her as beneficiary 4 or 5 years ago. Late last year, I made a withdrawl from the 529 to pay some of her college expenses.
A 1099-Q reflecting the withdrawl came with her name on it in January.
When I did our taxes for using Turbo Tax, I was asked if there was a 1099-Q with my name on it. 'NO'
When helping her with her (Federal) taxes using Turbo Tax, the same question arose - "YES". Then the 529 'earnings' showed up as taxable on her return. It cost her a few dollars (which I paid).
I keep reading that 529s are 'tax-free', but went over this several times and can't see a way to not be taxed. She has more in the 529, and her little sister has a nice 529 too. So this issue will come up again next year.
Have I missed something or is the 529 taxable in this case?