How are taxable distributions from a 529 plan calculated?
Emily Baldwin 
To calculate the taxable portion of the 529 plan distribution:
- Divide the AQEE by the total 529 plan distribution (Form 1099-Q, Box 1)
- Multiply the answer by the earnings portion of the total distribution (Form 1099-Q, Box 2).
- Subtract this amount from the total distributed earnings.
Is Coverdell distribution taxable?
Distributions. In general, the designated beneficiary of a Coverdell ESA can receive tax-free distributions to pay qualified education expenses. The distributions are tax-free to the extent the amount of the distributions doesn’t exceed the beneficiary’s qualified education expenses.
Who pays the tax on a 529 distribution?
Distributions from a 529 plan may be paid directly to the educational institution, to the beneficiary or to the account owner. Either the account owner or the beneficiary will have to pay income tax on the earnings portion of a non-qualified distribution plus a 10% tax penalty.
How to calculate the taxable portion of a 529 plan distribution?
To calculate the taxable portion of the 529 plan distribution: Divide the AQEE by the total 529 plan distribution (Form 1099-Q, Box 1) Multiply the answer by the earnings portion of the total distribution (Form 1099-Q, Box 2). Subtract this amount from the total distributed earnings
Where do I find 529 plan income on my tax return?
To calculate the taxable portion of the 529 plan distribution: Multiply the answer by the earnings portion of the total distribution (Form 1099-Q, Box 2). The result must be reported as income on the beneficiary’s or the account owner’s federal income tax return, Schedule 1 Form 1040, line 8 or Form 1040NR, line 21.
What is the IRS Form 1099 for a 529 plan?
IRS Form 1099-Q is a statement issued by a 529 plan or Coverdell ESA administrator that lists the amount of distributions in a given tax year.
What do I need to know about my 529 plan?
Typically, Box 1 of a Form 1099-Q lists the total distribution, Box 2 includes the earnings portion of the distribution and Box 3 includes the basis, which is the contribution portion of the distribution. The earnings portion of a non-qualified 529 plan distribution is subject to income tax and a 10% penalty. What is IRS Form 1098-T?
