Form 1099-Q reports a withdrawal from a qualified tuition program (a 529 plan) or a Coverdell education savings account. It splits the gross distribution into earnings and basis. You don't owe tax if the year's total withdrawals are no more than the student's adjusted qualified education expenses; if they're more, part of the earnings is taxable, usually with a 10% additional tax.
The form usually lands in January after a year of college or school bills, and it's often sent to the student rather than the parent who owns the account. Everything here comes from the IRS Instructions for Form 1099-Q (April 2025) and Publication 970.
Who receives it
For a 529 plan, the student (the designated beneficiary) is the recipient only if the withdrawal was paid directly to them, to an eligible school for their benefit, or straight to a Roth IRA for them. Otherwise the account owner is the recipient. For a Coverdell ESA, the beneficiary is always the recipient. That matters, because the recipient is the one who reports any taxable part. For 2025, the forms were due to recipients by February 2, 2026, because January 31 fell on a Saturday.
What the boxes mean
| Box | What it shows |
|---|---|
| 1 | Gross distribution, in cash or in kind, including refunds and payments on death or disability |
| 2 | Earnings (a loss appears only in the final year of distributions) |
| 3 | Basis: the part that's a return of contributions; box 1 minus box 2 |
| 4a and 4b | Trustee-to-trustee transfer; and, new, a transfer from a 529 plan to a Roth IRA |
| 5 | Whether it came from a private or state 529 plan, or a Coverdell ESA |
| 6 | Whether the recipient isn't the designated beneficiary |
| 7 | An optional distribution code (1 for distributions, 2 or 3 for excess Coverdell contributions, 4 for disability), or for a Coverdell ESA with no earnings and basis reported, the year-end fair market value labelled 'FMV' |
What counts as a qualified expense
- College and other eligible postsecondary schools: tuition, fees, books, supplies and required equipment; computers, software and internet used mainly by the student; room and board for students enrolled at least half-time, up to the school's allowance or actual campus housing charge.
- Registered apprenticeships: fees, books, supplies and equipment.
- Student loans: up to $10,000 of principal or interest for the beneficiary or a sibling.
- Kindergarten to grade 12: no more than $10,000 of tuition, plus curriculum materials, books, online materials, certain tutoring, standardised and admissions test fees, dual enrollment fees and educational therapies for students with disabilities.
- Recognised postsecondary credential programmes: tuition, fees, books, testing and required continuing education.
Mistakes families make with a 1099-Q
- Comparing the withdrawal with the full tuition bill instead of AQEE. Scholarships and grants come off first, and that's often what makes part of it taxable.
- Using the same expenses twice. Costs used for the American opportunity or lifetime learning credit can't also make a 529 withdrawal tax-free, although that overlap escapes the 10% additional tax.
- Paying room and board above the school's allowance, or for a student who isn't enrolled at least half-time.
- Assuming the parent reports it when the form is in the student's name, or the other way round. Check box 6 and the recipient name.
- Treating a direct transfer to another 529 as a withdrawal. A trustee-to-trustee transfer gets its own form with box 4a ticked and isn't taxable.
Working out the taxable part
First reduce qualified expenses by tax-free help such as scholarships, Pell grants, veterans' benefits and employer assistance. That gives the adjusted qualified education expenses (AQEE). If total withdrawals for the year are no more than AQEE, nothing is taxable. If they're more, Publication 970 uses a two-step fraction. Its example, using the IRS's figures as of October 2026:
| Item | Amount |
|---|---|
| Qualified expenses | $8,300 |
| Minus tax-free scholarship | $3,100 |
| AQEE | $5,200 |
| 529 withdrawal | $5,300 |
| Earnings in box 2 | $950 |
| Tax-free earnings ($950 x $5,200 / $5,300) | $932 |
| Taxable earnings | $18 |
The taxable earnings go on Schedule 1 (Form 1040), line 8z. Only the earnings can ever be taxed, never the contributions: the IRS treats the part you paid in as a return of your investment in the plan, which is why box 3 matters when you check the numbers.
The 10% additional tax and its exceptions
A taxable distribution normally carries a 10% additional tax, figured on Part II of Form 5329. It doesn't apply if the withdrawal was made after the beneficiary died, because they're disabled, to the extent of a tax-free scholarship or similar assistance, for attendance at a US military academy, or because the expenses were used for the American opportunity or lifetime learning credit.
Rollovers and changes that aren't taxed
- Moving funds to another 529 plan or to an ABLE account for the same beneficiary or a family member within 60 days isn't taxable.
- A direct transfer to a Roth IRA for the same beneficiary is allowed if the 529 account has been open more than 15 years, from contributions made more than 5 years earlier, within the annual Roth limit.
- Changing the beneficiary to a family member of the old beneficiary isn't a distribution and doesn't get a 1099-Q.
- If the school refunds an expense paid from the 529, recontributing it within 60 days avoids working out a taxable part.
Paper filers send Copy A with Form 1096, and the form is now fillable online. Like a 1099-INT, it's only the earnings that can create a tax bill.
Want AI doing the heavy lifting in your marketing?
I build the systems that handle the boring 80 percent, so you get your week back. Done properly, with the human kept in.
The verdict
Match each year's 529 withdrawals to that year's bills, after taking off scholarships. If you do, the 1099-Q is just a record. If you took out more, only the earnings share is taxed, and a scholarship usually removes the 10% on top.
Frequently asked questions
Is Form 1099-Q taxable?
Only if total withdrawals for the year exceed the student's adjusted qualified education expenses, and then only the earnings part.
Who gets Form 1099-Q, the parent or the student?
For a 529, the student if the payment went to them, their school or their Roth IRA; otherwise the account owner.
Can a 529 pay K-12 tuition?
Yes, up to $10,000 of tuition, plus certain other elementary and secondary education expenses.
Does the 10% penalty apply if my child gets a scholarship?
Not to the extent the withdrawal isn't more than the tax-free scholarship.
