NYS Income Adjustment for 529 distribution?!?! (Revised)

Read it again. You won't find any mention of "qualified" distributions. There are distributions, and there are qualified expenses. In some cases part of the distribution is taxable income and winds up on the student's

1040. It appears this is the NYS adjustment you're looking at. If none of his distributions was taxable on the Federal return there's nothing to adjust on his state return.

I think my confusion might stem from an actual error in TaxCut!

The NYS instructions say: "If you made a withdrawal and part of the withdrawal was included in your federal AGI on line 21 of federal Form 1040, then enter that amount on line

2 of the worksheet below" (that amount is then subtracted from your AGI)

To me that says that if you made a distribution for an unqualified expense and had to pay tax on it, then you can deduct it from your NYS AGI. Apparently NYS doesn't care if expenses are qualified or not?! Not likely, but I don't know what else it means.

TaxCut says: "Enter the amount of qualified withdrawals you made in 2008 from a New York's 529 college program if you included this amount on your 2008 Federal Return"

This makes no sense to me, since qualified withdrawals aren't included on the Federal Return; so this is pointless entry.

So, obviously I am still confused. Any guidance here? At this point it is pure curiosity, since I didn't include any withdrawal on my federal return.

That's what it says.

No, not "likely," absolutely.

NYS doesn't tax 529 distributions whether or not they were used for qualified expenses. You'll go crazy if you try to find the "why" lying beneath every tax law provision.