529 Account Beneficiary

[mcnabb-55]

Hello,

I'm currently a full time student who is married and independent.  My grandpa has a 529 account that is under his name, but I'm the beneficiary.  He used it to pay for my tuition's bill.  The way financial aide is set up, is that the grants have to pay for it, so once the financial aid came in, the money from the 529 that paid for the bill originally I got as a refund.  My wife and I made under $24,000 in 2019.  Do I need to report this on taxes, I wasn't given a 1099-Q. Thank you!

[SusanY1]

As long as the distribution plus the grants did not exceed your qualifying education expenses you do not need to report any income.   For the 529 plan distribution, qualifying expenses include the following:

• Tuition and fees.
• Books
• Supplies.
• Room and board - for more about how these are figured for off-campus students, please see IRS Publication 970 at this bookmark: IRS Publication 970, Qualifying Expenses from a 529 plan.

[mcnabb-55]

Thank you for the information. So if I get let's say $9,000 in grants. Tuition is $8,000. The distribution was $4,500.  This would mean I had $13,500, exceeding qualifying education expenses by $5,500.  That would mean I would have to report the distribution.  I already reported the grants with the 1098-t form.  My wife and I are both students who made under $10,000 together in 2019.  This extra $5,500 would still put us under the $24,000 limit.  Would I still need to report the 529 account?  Also, would the 1099-Q form be sent to my grandpa or me or both?

[SusanY1 · Accepted solution]

Don't forget that room, board, and books count as qualifying expenses, too! (from the 529 plan.)

Based on the other information that you have provided, however, it doesn't appear that you will have any taxable income for the year, even if the entire distribution is considered a taxable distribution. 

From the information given, it doesn't look like you need to file a tax return for 2019.

Form 1099-Q is typically mailed to the owner, but neither of you needs to report it when there is no taxable consequence to the distribution.  

[mcnabb-55]

Sounds good! Thank you for all the help.

[SusanY1]

You're very welcome!