who gets taxed on taxable 529 earnings ?

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  • RWG1950
    Senior Member
    • Nov 2017
    • 458

    #1

    who gets taxed on taxable 529 earnings ?

    Grandparents had contributed to 529 plan for their grandson many years earlier. Grandson now in college. $ 35,463 in qualified tuition billed by and paid directly to by the 529 plan.

    after working through the AQEE formula it appears that after taking into consideration a scholarship and the AOC, a portion of the earnings from the 529 distribution will be taxable.

    Who gets taxed ? TTB 12-6 seems to say " the owner of the QTP unless the distribution was paid directly to the designated beneficiary or to an eligible institution for the benefit of the eligible beneficiary "

    So the beneficiary (student) is not taxed ? Are the grandparents taxed ?
  • taxea
    Senior Member
    • Nov 2005
    • 4292

    #2
    529 is normally not taxable unless the designated party is issued the funds and does not attended college.
    Believe nothing you have not personally researched and verified.

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    • kamckinley
      Senior Member
      • Apr 2008
      • 178

      #3
      Whoever received the money (as determined by the 1099Q) gets taxed. Not sure if it will help, but if the amount is significant, they might request a corrected 1099Q in the student's name.

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