Form 1099-Q reports any distributions that you received from a "qualified education program". Generally, only the earnings in box 2 are subject to tax.
To view a sample Form 1099-Q, click here.
How do I report Form 1099-Q distribution?
If you received a 1099-Q with an amount listed in Box 1, you can report the distribution in two ways:
- If you received a 1099-Q distribution and used it to pay qualified education expenses, you can exclude the 1099-Q income. Enter the Gross Distribution, Earnings and Qualified Expenses here to exclude the income.
- If you wish to claim a larger Education Credit instead, enter all of the 1099-Q income here and do not enter any qualified expenses. Instead list all of your qualified expenses under the Education Credit section. The income on the 1099-Q will be included on your return.
Whichever option you choose, the expenses can only be listed once. If you choose Option 1 and list qualified expenses to exclude the distribution income, you must reduce your total qualified education expenses by the amount claimed here.
How do I report Form 1099-Q: Payments from Qualified Education Programs?
You must first determine what part, if any, of the distribution is taxable before you know what to do with the form.
To determine if your distribution is taxable, you need to know how much you paid for qualifying tuition, related fees, books, and room and board so you can determine if any part of the distribution is taxable.
Which is larger, the gross distribution in Box 1 of your 1099-Q or the amount of qualifying expenses that you paid for tuition and related fees?
If the two amount are equal, your distribution is not taxable and you don’t need to report this on your return. Retain the Form 1099-Q for your records.
If the amount in Box 1 is larger, A portion of the distribution is taxable.
You will need to enter that portion in your account as taxable income. To enter, go to:
- Less Common Income
- Payments from Qualified Education Programs 1099-Q
If the amount of Qualifying Expenses is larger, the distribution is not taxable. You don’t need to report the distribution on your return. Retain the Form 1099-Q for your records.
You may qualify to take a credit or deduction for your expenses. You should receive a 1098-T for these expenses. You should reduce the amount of expenses by the amount in Box 1 of your 1099-Q. The remaining amount is what was paid out-of-pocket and can be claimed as an Education Credit.
How do I report Form 1099-Q: Coverdell ESA Distribution?
To enter Form 1099-Q distributions in your account, go to:
- Less Common Income
- Payments from Qualified Education Programs From 1099-Q
Form 1099-Q information is entered, and the program will calculate the taxable portion (if any) of the earnings included in the distribution. Please be sure to have the total that was paid for qualified education expenses on hand.
A taxpayer may establish, for a designated beneficiary, a Coverdell Education Savings Account (ESA) to finance the qualified education expenses, if the taxpayer's modified AGI is less than $110,000 ($220,000 if filing a joint return). Contributions are not deductible to a Coverdell ESA but amounts deposited, grow tax-free in the account until distributed.
Will Form 1099-Q Coverdell ESA Distribution affect my return?
If the distribution and the qualified education expenses are equal to, generally none of your earnings will be taxable. Generally, the IRS will not tax the earnings if the distribution was spent wholly for education expenses.
If qualified education expenses exceed the distribution amount, the difference (excess) may be claimed as an education credit or tuition and fees adjustment.
If the distribution exceeds the qualified education expenses, the part of the distribution not used for qualified expenses will be taxable. The entire distribution will not be subject to tax, but a percentage of the earnings may be.