If you were the owner of the 529 or Coverdell, and your child is the beneficiary, then only the beneficiary reports the income. Both the owner and the beneficiary are issued copies of the 1099-Q. Distributions are exempt from tax when used for qualified education expenses.
If you were the beneficiary, and you were not a student in 2016, then the distribution is taxable. Only the education expenses of the beneficiary count as non-taxable expenses. In addition to the tax on the earnings, there is a 10% additional tax on the distribution.
More information about calculating the tax on nonqualified
distributions can be found in Chapter 8 of Publication 970, Tax Benefits
for Education.
