Are distributions taxable?
The part of a distribution representing the amount paid or contributed to a QTP does not have to be included in income. This is a return of the investment in the plan. The designated beneficiary generally does not have to include in income any earnings distributed from a QTP if the total distribution is less than or equal to adjusted qualified education expenses (defined under Figuring the Taxable Portion of a Distribution, below). Note. Before 2004, the beneficiary had to include in income any earnings distributed from a QTP established and maintained by an eligible educational institution. Earnings and return of investment. You will receive a Form 1099-Q, Payments From Qualified Education Programs (Under Sections 529 and 530), from each of the programs from which you received a QTP distribution in 2004. The amount of your gross distribution (box 1) shown on each form will be divided between your earnings (box 2) and your basis, or return of investment, (box 3). Form 1099-Q should be
You do not include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s). You also do not include distributions from your Roth IRA that you roll over tax free into another Roth IRA. You may have to include part of other distributions in your income. See Ordering Rules for Distributions, later.
