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1099-Q Boxes 1, 2 and 3: Gross, Earnings and Basis

Updated September 29, 2026. Quick answer: Form 1099-Q reports a withdrawal from a 529 plan or Coverdell ESA. Box 1 is the gross amount, Box 2 is the earnings part of it and Box 3 is the basis, the part that came from contributions. The IRS says Box 3 must equal Box 1 minus Box 2.

Read box by box from the IRS form text: Form 1098-T box 7, Form 1098-T box 8 and Form 1098-E box 1.

Related 1099 box explainers: 1099-B Box 1d Proceeds and Box 1e Cost Basis Explained, 1099-B Box 1g Wash Sale Loss Disallowed Explained and 1099-DIV Box 1a and 1b.

Box 1, the gross distribution

For a 529 plan (a qualified tuition program, or QTP) the instructions say: “Gross distributions from a QTP, whether in cash or in-kind, include amounts for tuition credits or certificates, payment vouchers, tuition waivers, or other similar items.” They add: “Gross distributions also include a refund to the account owner or the designated beneficiary, or to the beneficiary upon death or disability.” The 1099-Q instructions read here are the April 2025 revision, which the IRS marks for use for tax year 2025 and later until a superseding revision is issued.

Box 2, the earnings

The payer works out the earnings with a set method: “To determine the earnings or (loss) on the gross distribution reported in box 1, use the earnings ratio described in Proposed Regulations section 1.529-3, Notice 2001-81, and Notice 2016-13.” A loss is limited: “Enter a (loss) in box 2 only if this is the final year for distributions from the account.” And “Earnings are not subject to backup withholding.”

Box 3, the basis

“For QTPs and Coverdell ESAs, if you can determine basis, enter in box 3 the basis included in the gross distribution reported in box 1.” The check between the three boxes is “The amount in box 3 must equal box 1 minus box 2.” Here is CMG’s own illustration, computed with that formula and not an IRS figure. If Box 1 shows $10,000 and Box 2 shows $2,000, Box 3 works out to $8,000 (the calculation is $10,000 minus $2,000). A Coverdell ESA is the exception: “If earnings and basis are not reported for Coverdell ESA distributions, leave boxes 2 and 3 blank. Do not enter zero.”

The checkboxes beside them

Boxes 5a to 5c say what the money came out of: “Check box 5a (private QTP) if the distribution is from a QTP established by one or more private eligible educational institutions, or check box 5b (state QTP) if the distribution is from a QTP established by a state. Otherwise, check box 5c (Coverdell ESA).” Box 6 is “Check the box if the recipient is not the designated beneficiary under a QTP or a Coverdell ESA (see section 529(e)(1)).” Direct transfers between accounts use Box 4, covered on the Box 4 page.

Common mistakes

  • Reading Box 1 as taxable income. It is the gross amount; Box 2 is the earnings part.
  • Entering zero for a Coverdell ESA with unreported earnings. The instructions say to leave boxes 2 and 3 blank instead.
  • Expecting a loss in Box 2 every year. The instructions allow it only in the final year of distributions from the account.

Related: 1099-Q Box 4a and 4b: Trustee-to-Trustee Transfers, 1099-Q Box 7 Distribution Codes 1 to 6 Explained, the state tax rules for 529 plans, and what to do with leftover 529 money.

Every box in one place: the 1099-SA and 1099-Q boxes table. If your withdrawal came from an IRA or 401(k), see the Form 1099-R Box 7 codes.

Figures verified against the IRS Instructions for Form 1099-Q (Rev. April 2025) and the IRS About Form 1099-Q page, with the revision line of the 1099-SA and 5498-SA instructions, on September 30, 2026.

Sources

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Source: the IRS instructions for the filer of each form, read at irs.gov on September 29, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.