Q.So, if he used all of the 529 distributions for tuition, room and board, he would not have any income.
A. Yes, that's correct.
Q. I was under the impression that the earnings (shown in Box 2 of 1099 Q) would count as income for tax purposes even if the funds were used for educational purposes.
A. No. that's whole tax advantage of the 529 plan. The contributions earned interest, dividends and capital gains over the years. Then you get to take them out, tax free, as long as you use all the money (contributions and earning) for qualified educational expenses. The promise of tax free earnings, in the future, is the encouragement to get people to save for college.
