Tax season is approaching and individuals are preparing their financial records to get tax returns ready.

If you had a withdrawal from an Invest529, Prepaid529 or CollegeWealth account(s) during 2024, a Form 1099-Q will be issued for tax purposes. The form will be posted to online accounts and physical copies will be mailed at the end of January 2025.

There are a couple important things to note about receiving your Form 1099-Q.

• If a withdrawal was paid directly to an account owner, a 1099-Q will be mailed to the account owner. To view online, simply sign into your account on Virginia529.com, locate the View My Account tab, and select Tax Information (1099-Q Form) from the dropdown menu.
• If a withdrawal was paid directly to the student, to a K-12 school or eligible educational institution, the student will receive the Form 1099-Q in the mail. Students can sign in to their online account to view a digital copy once available (using the steps above) or create a login ID if they do not already have online account access. It's important to note that the account owner will not be able to view this document in their own online account.
• If you rolled over funds to a Roth IRA, the Roth IRA account owner will be sent a Form 1099-Q to the address you listed on the request.
• You’ll notice a change to your 1099-Q this year – the form will be issued by Commonwealth Savers Plan. This change is part of the larger organizational transition with Virginia529 becoming Commonwealth Savers and the educational savings program being rebranded as Invest529. Related: An Updated Look and Feel for Invest529

While 529 plans are relatively low-maintenance savings vehicles, there are times when account activity will need to be included on your tax return. Here are some factors to consider – and to discuss with a tax professional – when preparing your tax return.

Reporting 1099-Q Amounts on Your Tax Return

Withdrawals are reported to the IRS with Form 1099-Q. Qualified higher education expenses include tuition, fees, books, computers and related technology, and some room and board costs for students attending an eligible college or university.

Families can also take a tax-free withdrawal to pay for tuition expenses at private, public and religious elementary and high schools. This amount is limited to $10,000 per year, per student.

The SECURE Act of 2019 expanded the definition of qualified higher education expenses to include costs of apprenticeship programs and qualified student loan repayments. Qualified distributions for student loan repayments have a lifetime limit of $10,000 per beneficiary and each of their siblings. 

529 withdrawals spent on other purchases, such as transportation costs or health insurance coverage are generally considered non-qualified.

If the withdrawal(s) taken on your account did not exceed the total amount of 2024 qualified higher education expenses incurred, you should not need to report the withdrawal(s) on your tax return.  If, however, the withdrawal(s) exceeded your total qualified higher education expenses, consult a tax professional for more information as you may have income tax consequences.

Reporting Contributions on Your Tax Return

If you’ve simply been contributing to an existing 529 account you may not have to report anything on your federal income tax return. Contributions to a 529 plan are not deductible and therefore do not have to be reported on federal income tax returns. What’s more, the investment earnings in your account are not reportable until the year they are withdrawn. 

As for state income tax filings, account owners who are Virginia taxpayers may deduct contributions up to $4,000 per account per year with an unlimited carryforward to future tax years, subject to certain restrictions.

Those account owners who are Virginia taxpayers age 70 and above may deduct the entire amount contributed to their Invest529, Prepaid529 or CollegeWealth account(s) in one year. In addition, contributions to accounts are treated as a completed gift by the account owner to the student. For the 2024 tax year, this means contributions up to $18,000 a year, or up to $36,000 if married, may be gift tax free. You should consult your tax advisor regarding the specific tax consequences of contributions.

If you’re expecting a tax refund check this year, consider transforming it into a contribution toward your Invest529 portfolio.

Review the IRS Form 1099-Q Fact Sheet