IRS Form 1099-Q – If you’re involved with a 529 plan or a Coverdell Education Savings Account (ESA), you’ve likely encountered IRS Form 1099-Q. This form reports distributions from qualified education programs under Sections 529 and 530 of the Internal Revenue Code. Whether you’re a parent saving for college, a student receiving funds, or a program administrator, understanding Form 1099-Q is essential for accurate tax reporting. In this article, we’ll break down what the form is, who receives it, its tax implications, and recent updates for the 2025 tax year.
What Is IRS Form 1099-Q?
IRS Form 1099-Q, titled “Payments from Qualified Education Programs (Under Sections 529 and 530),” is an information return used to report gross distributions from qualified tuition programs (QTPs, commonly known as 529 plans) and Coverdell ESAs. These programs help families save for education expenses on a tax-advantaged basis.
The form documents payments made during the calendar year, including cash distributions, in-kind distributions (like tuition credits or waivers), refunds, and certain transfers. It’s not filed by the recipient but by the program’s trustee or administrator. Recipients use the information on Form 1099-Q to determine if any portion of the distribution is taxable and must be reported on their federal income tax return.
Key programs covered:
- Section 529 Plans (QTPs): State-sponsored or private prepaid tuition or savings plans for higher education expenses.
- Section 530 Accounts (Coverdell ESAs): Accounts for elementary, secondary, or higher education expenses, with contributions limited to $2,000 per year per beneficiary.
Nontaxable distributions—those used for qualified education expenses—are not required to be reported on your income tax return, but you must calculate the taxability yourself.
Who Receives Form 1099-Q and Who Must File It?
Who Must File Form 1099-Q?
The form must be filed by:
- Officers, employees, or designees of state or eligible educational institutions managing QTPs.
- Trustees of Coverdell ESAs.
Filing is required for any gross distribution (cash or in-kind) of $10 or more during the tax year. However, no form is needed for changes in designated beneficiaries if the new beneficiary is a family member (including spouses, children, siblings, parents, in-laws, and first cousins).
Filers must furnish Copy B of the form to recipients by January 31 of the following year and file Copy A with the IRS by February 28 (or March 31 if filing electronically).
Who Receives the Form?
- For QTPs: The designated beneficiary if the distribution is paid directly to them or an educational institution on their behalf, or to a Roth IRA for them. Otherwise, it’s sent to the account owner.
- For Coverdell ESAs: Always sent to the designated beneficiary.
If the recipient is not the designated beneficiary (e.g., a parent receiving funds), Box 6 will be checked.
Key Boxes on Form 1099-Q Explained
Form 1099-Q includes several boxes that detail the distribution. Here’s a breakdown based on the latest revision (April 2025):
- Box 1: Gross Distribution – Total amount distributed, including earnings and basis. This covers refunds, payments upon death or disability, and withdrawals of excess contributions.
- Box 2: Earnings – The taxable portion (if any), calculated using IRS-specified ratios. Enter zero if there’s a loss (unless it’s the final distribution year).
- Box 3: Basis – The original contributions (principal) included in the gross distribution. Box 1 should equal Box 2 plus Box 3.
- Box 4: Type of Transfer – New for 2025: Check 4a for trustee-to-trustee rollovers (e.g., to another QTP, Coverdell ESA, or ABLE account). Check 4b for QTP transfers to a Roth IRA.
- Box 5: Distribution Source – Indicates if from a private QTP (5a), state QTP (5b), or Coverdell ESA (5c).
- Box 6: Designated Beneficiary Checkbox – Checked if the recipient isn’t the designated beneficiary.
- Box 7: Distribution Codes or FMV – Optional codes (1-6) for specifics like excess contributions or death distributions. For Coverdell ESAs without earnings/basis, shows the fair market value (FMV) as of December 31.
For Coverdell ESAs, if earnings and basis aren’t reported, Boxes 2 and 3 are left blank, and FMV goes in Box 7.
Tax Implications of 529 and Coverdell Distributions
Distributions from qualified education programs are generally tax-free if used for qualified expenses like tuition, fees, books, supplies, room and board, and certain K-12 costs (up to limits). However:
- Taxable Portions: Earnings (Box 2) are taxable if not used for qualified expenses, exceeding expenses, or due to beneficiary changes not meeting family member rules. They may also incur a 10% additional tax (report on Form 5329).
- Roth IRA Rollovers: Starting in 2024 (applicable to 2025 filings), limited transfers from 529 plans to Roth IRAs are allowed without tax, reported in Box 4b.
- ABLE Account Rollovers: Limited rollovers from 529 plans to ABLE accounts (for disability expenses) are permitted within 60 days, reported with Box 4a checked and code 1 in Box 7.
- Excess Contributions: For Coverdell ESAs, withdrawals of excess contributions plus earnings require two Forms 1099-Q if applicable.
Always consult IRS Publication 970, “Tax Benefits for Education,” for details on qualified expenses and tax calculations.
Recent Changes for the 2025 Tax Year
The IRS updated Form 1099-Q in April 2025 with a new checkbox in Box 4b for QTP-to-Roth IRA transfers, reflecting SECURE 2.0 Act provisions allowing lifetime Roth rollovers up to $35,000 per beneficiary (with annual limits). The form now uses continuous-use revisions for 2025 and beyond. No other major developments are noted as of early 2026.
How to Report Form 1099-Q on Your Tax Return?
Recipients don’t file Form 1099-Q but use it to complete their Form 1040 or 1040-SR. If earnings are taxable:
- Report on Schedule 1 (Form 1040), line 8z (other income).
- Calculate the taxable amount by comparing distributions to adjusted qualified education expenses (subtract scholarships, tax-free assistance, etc.).
- If subject to the 10% penalty, use Form 5329.
For software like TurboTax, enter the form details directly; it will handle the calculations. Keep records for at least three years.
Frequently Asked Questions About IRS Form 1099-Q
What if I don’t receive my 1099-Q?
Contact the program administrator. You can also access account statements to calculate distributions.
Are all 529 withdrawals taxable?
No, only the earnings portion if not used for qualified expenses.
Can I roll over a 529 to a Roth IRA?
Yes, under new rules, but limits apply: The 529 must be open for 15 years, and contributions from the last five years can’t be rolled over.
What’s the difference between 529 and Coverdell ESA?
529 plans have higher contribution limits and are state-specific, while Coverdell ESAs allow up to $2,000 annually and cover K-12 expenses more broadly.
Do I report 1099-Q if the distribution was a rollover?
Rollovers aren’t typically taxable if completed within 60 days, but they’re reported on the form.
Final Thoughts
Navigating IRS Form 1099-Q ensures you maximize tax benefits from education savings while avoiding penalties. Always verify details with the latest IRS guidelines, and consider consulting a tax professional for complex situations. For the official form, download it from the IRS website: https://www.irs.gov/pub/irs-pdf/f1099q.pdf. Stay informed on education tax credits to make the most of your savings.