![]() ![]() Each withdrawal is made up of a pro rata share of original contribution (basis) and investment gains (if any). The withdrawals may be paid to the account owner, the beneficiary, or the college/university. When withdrawals are taken, details are reported to the IRS via form 1099-Q. Plus, if you sold those 529 account investments to pay for your child’s college, you wouldn’t face federal income tax on the sale proceeds or account withdrawals - as long as you use those funds to pay for qualified education-related expenses. Are 529 earnings taxable?Įarnings on 529 accounts are not treated as taxable income. Unlike an IRA, contributions to a 529 plan are not deductible and therefore do not have to be reported on federal income tax returns. Contributions to a 529 plan are not deductible and therefore do not have to be reported on federal income tax returns. ![]() If you’ve simply been contributing to an existing 529 account you may not have to report anything on your federal income tax return. You might be interested: What is islamic law called How do I report 529 contributions? Consult a tax professional for more information. If additional penalties apply, you also may need to complete IRS form 5329. If your earnings are taxable, you must report the taxable earnings (box 2 on the 1099-Q form) on line 21 of IRS form 1040. However, if you accidentally use the funds on ineligible expenses or make a withdrawal, the 529 distribution may be subject to a penalty fee and taxes. You do not report the distributions as income. Your adjusted expenses are $8,000-which means you don’t have to report any education program distributions on your tax return. Do I have to report a 1099-Q on my tax return?įor most qualified education program beneficiaries, the amounts reported on the 1099-Q aren’t reported on a tax return. ![]() If the distribution is subject to the 10% penalty tax, the additional tax must be reported on Schedule 2 (Form 1040), line 6, or Form 1040NR, line 57. 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. ![]()
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