IRS Instruction 1099-Q – Qualified education savings plans help families save for education expenses with significant tax advantages. Two key programs are Qualified Tuition Programs (QTPs) under Section 529 — commonly known as 529 plans — and Coverdell Education Savings Accounts (ESAs) under Section 530. Distributions from these programs are reported to the IRS and recipients using Form 1099-Q.
This form ensures proper tracking of payments, helping determine if any portion is taxable. Below is a comprehensive, SEO-optimized guide based on official IRS sources, including the Instructions for Form 1099-Q (Rev. April 2025) and related publications.
What Is IRS Form 1099-Q?
Form 1099-Q, titled “Payments from Qualified Education Programs (Under Sections 529 and 530),” reports distributions (withdrawals or payments) from:
- Qualified Tuition Programs (QTPs or 529 plans), established by states or eligible educational institutions for higher education (and limited K-12) expenses.
- Coverdell Education Savings Accounts (ESAs), trust or custodial accounts for qualified education expenses.
Who files Form 1099-Q?
- Officers, employees, or designees controlling a QTP (state agencies or institutions).
- Trustees of Coverdell ESAs.
Filers must issue Form 1099-Q for any distribution, including cash, in-kind payments, refunds, excess contribution withdrawals, or certain rollovers/transfers. No form is required for beneficiary changes to family members (with defined family rules under each section).
Download the official PDF: IRS Form 1099-Q Instructions.
Key Boxes on Form 1099-Q and What They Mean
The form includes payer/recipient details and these critical boxes:
- Box 1 – Gross Distribution: Total amount distributed (including in-kind items like tuition credits or waivers).
- Box 2 – Earnings: Taxable earnings portion (or loss in final-year distributions). Calculated per IRS guidelines (e.g., earnings ratio in proposed regs and notices like 2001-81 and 2016-13). For Coverdell ESAs without earnings, this may be blank with fair market value noted elsewhere.
- Box 3 – Basis: Your contributions/investment (Box 1 minus Box 2, if determinable).
- Boxes 4a–4b – Type of Transfer: Indicates trustee-to-trustee transfers (4a) or QTP-to-Roth IRA rollovers (4b).
- Boxes 5a–5c – Distribution Is From: Specifies private QTP (5a), state QTP (5b), or Coverdell ESA (5c).
- Box 6: Checked if recipient ≠ designated beneficiary.
- Box 7: Optional distribution codes (e.g., for excess contributions, disability, death).
Account number is required for multiple accounts; TIN truncation allowed on recipient copies but not IRS filings.
Taxability of Distributions from 529 Plans and Coverdell ESAs
Distributions are generally tax-free if used for qualified education expenses (e.g., tuition, fees, books, supplies, room/board for eligible students, apprenticeships, or limited student loan repayments/ABLE rollovers).
- Earnings (Box 2) are tax-free when used qualifiedly.
- Non-qualified use makes earnings taxable as income, plus a potential 10% additional tax (penalty) on earnings.
- Basis (contributions) is always tax-free.
- Trustee-to-trustee transfers or qualified rollovers (e.g., QTP to ABLE within 60 days, or limited QTP to Roth IRA) are non-taxable.
- Excess Coverdell contributions + earnings may be taxable currently or in prior years.
You (the recipient) determine taxability — not the payer. Compare gross distribution to qualified expenses. Refer to IRS Publication 970, Tax Benefits for Education, for details on figuring taxable amounts.
Coordination with Form 1098-T: Use tuition payments reported on Form 1098-T (from schools) to verify qualified expenses against 1099-Q distributions.
Who Receives Form 1099-Q?
- For QTPs: Typically the designated beneficiary if paid directly to them/institution or certain transfers; otherwise, the account owner.
- For Coverdell ESAs: Always the designated beneficiary.
Statements must be furnished by January 31 (or per general info return rules). File with IRS by February 28 (paper) or March 31 (electronic), with lowered e-file threshold of 10 returns.
Recent Updates and Important Notes (2025 Instructions)
- New checkboxes for trustee-to-trustee transfers (including to ABLE) and QTP-to-Roth IRA rollovers.
- Applies to tax year 2025 and later until superseded.
- Earnings not subject to backup withholding.
- Separate forms may be needed for excess contributions vs. other distributions in Coverdell ESAs.
- For latest changes, check IRS.gov/Form1099Q.
Why Understanding Form 1099-Q Matters for Tax Planning?
Proper use of 529 plans and Coverdell ESAs maximizes tax-free growth and withdrawals for education. If you receive a 1099-Q, review it against expenses to avoid unexpected taxes or penalties. Consult IRS Publication 970 or a tax professional for personalized advice.
For the most accurate, up-to-date information, always refer to official IRS resources:
This guide helps taxpayers, students, and families navigate education savings reporting effectively.