For any tax year during which there was a distribution from your Virginia College Savings Plan account, an IRS Form 1099-Q will be issued for your account. If the distribution was made directly to the beneficiary or to a school, the 1099-Q must be sent to the beneficiary; all other 1099-Qs will be sent to the account owner.

Be aware that you must keep documentation (copies of invoices, meal plan contracts, textbook receipts) for at least three years for tax purposes. Additionally, you must maintain adequate documentation of your expenses to show that your distributions were for qualified expenses because you are responsible for determining whether your distributions are qualified or non-qualified.

All distributions from Section 529 accounts that do not exceed the amount of adjusted qualified higher education expenses are tax-free at the federal level. In Virginia, qualified Section 529 distributions are also free of state taxes. If you live in a state other than Virginia, check with your state's department of taxation to determine whether qualified distributions from another state's Section 529 program are taxable.