There is no special designated spot for taxable 529 distributions at this time. Thus, this taxable portion should be included on Schedule 1 line 8 “Other Income” with a description of the income type written in the corresponding blank space. Administrators must also provide a copy of each form to the IRS no later than March 31 if sent electronically (e-file), or February 28 if using a paper copy. If you don’t receive a 1099 and you know you should, contact the administer https://turbo-tax.org/a of your qualified tuition plans. However, if you contributed more than $15,000 to a 529 as a single filer or more than $30,000 as a married filing joint filer in tax year 2021, you will need to report your contributions on IRS Form 709 . This is because the annual federal gift tax exclusion amounts ($15,000 for single and $30,000 for a couple in 2021) apply to 529 plan contributions. Any contributions over the stated exclusion amounts need to be recorded.

Change the designated beneficiary to another member of the original beneficiary’s family. (IRS Publication 970 has a lengthy list detailing which relatives count as family in this case.) This can be done for any reason, but is an option particularly if your child receives a scholarship or decides not to attend college. If you’re enrolled in a plan through a financial advisor, contact them when you’re ready to withdraw funds.

How to report a taxable 529 plan distribution on federal income tax returns

This gets the portion of the earnings which is nontaxable. Made a distribution from a qualified tuition program . The more difficult situation is the student living off campus. Here the amount of room and board is capped at the figure reported by the college to the government as the room and board component of the “cost of attendance” at that particular college. The figure is typically much lower for the student living at home with parents than for the student living off campus in an apartment. You have to ask the school for the figure based on the living situation of the student.

To determine the amount of a qualified 529 plan distribution, any amount used to generate the federal education tax credit must be subtracted from the total qualified expenses. When the Form 1099-Q is issued to the 529 plan beneficiary, any taxable amount of the distribution will be reported on the beneficiary’s income tax return. This typically results in a lower tax obligation than if the Form 1099-Q is issued to the parent or 529 plan account owner. Tuition in connection with the Beneficiary’s how to report 529 withdrawal on tax return enrollment or attendance at an elementary or secondary public, private, or religious school. The amount of cash distributions for such expenses from all 529 qualified tuition programs with respect to a Beneficiary shall, in the aggregate, not exceed $10,000 during the taxable year. For any year in which a withdrawal is taken from a Sec. 529 college savings plan, the plan must issue a Form 1099-Q, “Payments from Qualified Education Programs,” by February 1 of the following year.

File

For example, if you take out $5,000 to cover tuition in December of 2018, but don’t pay that tuition until January of 2019, you could wind up with a taxable distribution from the plan. But what about taking the money out when you need it to pay college costs? So you’ll want to be sure you know how to make 529 withdrawals correctly. If the money from the withdrawal will go to the account beneficiary, I recommend having the check made out to him or her. Then have the beneficiary sign the check over to you so you can control how it’s spent.

Many colleges prefer payments to be made electronically through their website from a bank or brokerage account. You can choose to pay bills first and then reimburse yourself from the 529 account, or you can pull money from the 529 account and then use it to pay bills from your bank or brokerage account. This path also provides flexibility when paying smaller bills like those for books or off-campus room and board.

About Form 1099-Q, Payments from Qualified Education Programs (Under Sections 529 and

Historical and current end-of-day data provided by FACTSET. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements. Some or all of withdrawn account earnings might be taxable, so the IRS will be interested to see what is shown on the recipient’s Form 1040. On the other hand, if you funded the 529 account with your own money, the money in the account actually belongs to you, and you can take a withdrawal for any reason you want.