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I'll try to make this simple as I can:

-My son is a dependent on our (his parents) tax return.

-He had $10,000 of qualified education expenses and they were reported on Form 1098-T.

-$10,000 was distributed from a Section 529 plan that was set up by his grandparents for his benefit to pay these expenses and reported as such on Form 1099-Q.

Here is my confusion: After TurboTax asks me to enter my sons qualifed education expenses it then prompts me to enter any "Tax-Free Eduction Assistance" that my son received. It instructs that tax-free distributions from qualifed tuition programs are in this catagory.
If I enter the $10,000 from the 1099-Q ,as prompted, then it calculates that we have $0.00 in education expenses and therefore are not eligible for any of the Education Credits.

Is this correct? The dollars contributed to the 529 account were after-tax dollars and therefore in that sense were not tax-free.

I was counting on getting some education credits......

I hope this makes sense.


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