Form 1099-Q: Payments From Qualified Education Programs

What it is

Form 1099-Q reports distributions from qualified education programs: Coverdell Education Savings Accounts (CESAs) and 529 plans (qualified tuition programs, QTPs). Distributors (state program administrators, qualified educational institutions, or anyone making a distribution) send the form to the person who received the distribution. The form helps determine whether any portion of the distribution is taxable.

Key takeaways

• A 1099-Q reports gross distributions, earnings, and basis from a CESA or 529 plan for the tax year.
• The recipient whose Social Security number appears on the form generally must report any taxable portion on their tax return.
• Qualified education expenses generally make earnings tax-free; excess distributions used for nonqualified expenses are taxable and may incur a 10% penalty on earnings.
• If distributions are non-taxable, you don’t need to include them on your return but should keep the form with your records.

Who files and who receives it

• Filed by the payer/trustee who controls the program or by anyone who makes a distribution from a 529 plan.
• Issued to the recipient of the distribution (often the beneficiary). The recipient—not necessarily the account owner—reports any taxable amount if their SSN/TIN is on the form.

When distributions are taxable

• Compare gross distributions (what you received) to the beneficiary’s adjusted qualified education expenses for the same tax year.
• Contributions (basis) aren’t taxed when distributed. Earnings are tax-free only to the extent they’re used for qualified expenses.
• If gross distributions exceed qualified expenses, the excess earnings are taxable and generally subject to a 10% additional tax (penalty) on the earnings portion unless an exception applies.
• Certain transfers or rollovers can trigger income inclusion: for QTPs, multiple transfers/rollovers within 12 months for the same beneficiary or a change in designated beneficiary to someone who is not a family member; similar rules apply to CESAs (with additional age-based limits).

Form contents (boxes)

• Box 1 — Gross distribution (total distributions, cash or in-kind).
• Box 2 — Earnings portion of the distribution.
• Box 3 — Basis (Box 1 minus Box 2).
• Box 4 — Trustee-to-trustee transfer checkbox (includes certain rollovers).
• Box 5 — Type of account (CESA or QTP).
• Box 6 — Indicates whether the recipient is the designated beneficiary.
• Distributors may also include distribution codes below boxes 5–6.

Rollovers and transfers

• Trustee-to-trustee transfers and qualified rollovers (including some rollovers to ABLE accounts) may be non-taxable if rules are followed (e.g., timing and eligible beneficiary requirements).
• Some rollovers are subject to timing limits (for example, the rollover must generally occur within 60 days of distribution).

Filing and records

• The payer files Copy A with the IRS, sends Copy B to the recipient, and keeps Copy C.
• If the distribution is taxable, include the taxable amount on your federal return (generally on Schedule 1 and Form 1040). Keep the 1099-Q with your tax records.
• If you believe you should have received a 1099-Q but did not, contact the plan distributor.

Common questions

Who reports the 1099-Q—parent or student?
* The person who received the distribution and whose TIN/SSN is on the form must report any taxable portion. That might be a parent, the student, or the school (if paid directly).

Do 529 withdrawals count as income?
* Withdrawals of contributions (basis) are not taxable. Earnings are not taxed if used for qualified education expenses. Earnings used for nonqualified expenses are taxable and may be subject to the 10% penalty.

Where to get the form and instructions

Form 1099-Q and instructions are available from the IRS website. For questions about specific tax consequences or complex situations (rollovers, beneficiary changes, or mixed-use distributions), consult the IRS instructions for Form 1099-Q or a qualified tax advisor.