What a 1099-Q Form Tells You About Education Savings Withdrawals

A 1099-Q reports money you took out of a may have access to education savings account

A 1099-Q is a tax form that reports withdrawals from education savings accounts — specifically 529 plans and Coverdell Education Savings Accounts (ESAs). Your financial institution sends it to you and the IRS when you withdraw money from one of these accounts during the tax year. The form shows how much you withdrew and how much of that withdrawal was earnings (the money your account made through growth) versus contributions (the money you or someone else originally put in).

You receive a 1099-Q even if the withdrawal was used for legitimate education expenses. The form itself does not determine whether you owe taxes on the withdrawal — that depends on what you spent the money on and the rules of your specific account type. But the IRS uses the 1099-Q to track these transactions, so you need to report it on your tax return.

Key Takeaways

• A 1099-Q is issued by the financial institution holding your 529 plan or Coverdell ESA whenever you withdraw money during a tax year.
• The form separates your withdrawal into contributions (which are usually not taxed) and earnings (which may be taxed depending on how you spent the money).
• Withdrawals used for may have access to education expenses — tuition, fees, books, room and board — typically avoid taxes on the earnings portion.
• Withdrawals not used for education expenses may result in income tax and a 10 percent penalty on the earnings portion.
• You report the 1099-Q information on your tax return, and the IRS receives a copy to verify your reported income.

The two parts of a 1099-Q withdrawal

Every withdrawal from a 529 or Coverdell account has two components, and the 1099-Q breaks them down separately. Contributions are the dollars you (or a grandparent, parent, or other person) originally deposited into the account. These are not taxed when you withdraw them because the money was already taxed or came from after-tax income when it went in. Earnings are the investment gains — the money your account made through interest, dividends, or investment growth.

The 1099-Q shows both amounts in separate boxes. This distinction matters because the tax treatment of earnings depends entirely on what you spent the money on. If you used the earnings for a may have access to education expense, you owe no federal income tax or penalty on that portion. If you used the money for something else — a car, a laptop for non-school use, or living expenses not covered by your school — the earnings portion becomes taxable income, and you may also owe a 10 percent penalty.

When you receive your 1099-Q

The financial institution managing your 529 plan or Coverdell ESA sends you a 1099-Q by January 31 of the year following the withdrawal. For example, if you withdrew money in December 2024, you would receive the form by January 31, 2025. The institution also sends a copy to the IRS, so the withdrawal is already in the tax system.

You should receive the form even if you withdrew money for education expenses and expect to owe no tax. The 1099-Q is a reporting form, not a tax bill. Your job is to report the information on your tax return and explain to the IRS (if necessary) why the withdrawal was not taxable.

may have access to education expenses that avoid taxes on earnings

The IRS defines may have access to education expenses narrowly. They include tuition and mandatory fees at an accredited college, university, vocational school, or K-12 school. They also include books, supplies, equipment (including a computer), and room and board if you are enrolled at least half-time. Some expenses — like transportation, insurance, or a meal plan beyond what the school requires — do not count.

The school must be accredited and may be able to access to participate in federal student aid programs. If you are unsure whether your school qualifies, you can check the Federal Student Aid website or ask your school's financial aid office. The expenses must also occur in the same year as the withdrawal or within a reasonable time before or after.

If you paid for may have access to expenses with other money (a scholarship, a grant, or your own savings) in the same year, you cannot count those expenses again when determining whether your 529 or Coverdell withdrawal was used for education. The IRS treats the withdrawal as covering the expenses you paid for first, in order.

What happens if the withdrawal is not for education

If you withdraw money from a 529 or Coverdell account and do not use it for may have access to education expenses, the earnings portion becomes taxable income. You report it on your tax return, and you owe federal income tax at your regular rate. Additionally, you owe a 10 percent penalty on the earnings — not on the contributions, only on the earnings.

Some exceptions exist. If the account beneficiary receives a scholarship, you can withdraw an amount equal to the scholarship without penalty (though you still owe income tax on the earnings). If the beneficiary attends a U.S. military academy, you can withdraw without penalty. If the beneficiary dies or becomes disabled, you can withdraw without penalty. These are narrow exceptions, and the rules vary by account type, so review your plan documents or speak with a tax professional if you think an exception applies.

How to report a 1099-Q on your tax return

You report the information from your 1099-Q on Form 1040 (the main individual income tax return) or on Schedule 1 if you use the long form. The exact line depends on whether the earnings are taxable. If the withdrawal was for may have access to education expenses, you may not need to report it at all, but you should keep records showing what you spent the money on in case the IRS asks.

If the earnings are taxable, you report them as income. If you also owe the 10 percent penalty, that is calculated separately and added to your tax bill. Tax software usually walks you through this process by asking whether the withdrawal was for education and what the expenses were. If you are filing by hand or have a complex situation, a tax professional can help you report it correctly.

Keep your 1099-Q and receipts or documentation of education expenses for at least three years. The IRS can ask for proof that you spent the money on may have access to expenses, and having records protects you if there is ever a question about your return.

Frequently Asked Questions

Do I get a 1099-Q if I did not withdraw any money?

No. A 1099-Q is issued only when you actually withdraw money from the account. If your 529 or Coverdell account grew in value but you did not take any money out, you will not receive a 1099-Q that year.

What if I withdrew money but have not spent it yet?

The IRS allows a reasonable time to spend the money on education expenses. If you withdrew the money intending to pay for education and you do spend it within a reasonable period, you can still treat it as a may have access to withdrawal. However, you should have documentation showing your intent and the expenses. If you withdraw money and then decide not to use it for education, the earnings become taxable.

Can I roll over a 1099-Q withdrawal to avoid taxes?

You can roll over unused 529 funds to another family member's 529 account without triggering a 1099-Q, but this is different from a withdrawal. Once money is withdrawn and issued on a 1099-Q, you cannot roll it back. Some states allow rollovers between accounts; check your plan rules.

Does a 1099-Q affect financial aid?

A 1099-Q itself does not affect financial aid, but the withdrawal may. Money withdrawn from a 529 in the student's name can reduce future aid may be able to access. Withdrawals from a parent-owned 529 have less impact. Consult your school's financial aid office before making large withdrawals if the student is receiving aid.

What if the 1099-Q amount is wrong?

Contact the financial institution that issued the form. They can issue a corrected 1099-Q (marked as a correction) if there was an error. You will receive the corrected form, and the IRS will receive a copy as well. Do not ignore a 1099-Q you believe is incorrect; report the discrepancy to the institution promptly.