U.S. · Tax forms
1099-Q box 2 earnings.
The earnings in the distribution, not the amount you owe tax on.
Box 2 is the earnings part of the gross distribution in box 1. Box 3 is the basis, and must equal box 1 minus box 2. Earnings are taxable only to the extent the distribution is more than adjusted qualified education expenses: the taxable part is box 2 minus box 2 times AQEE divided by the total distributed, reported on Schedule 1, line 8z.
Taxable earnings from a 1099-Q
Result
Form 1099-Q boxes
| Box | What the payer reports | What it means for you |
|---|---|---|
| Box 1 | Gross distribution, in cash or in kind, including refunds and payments on death or disability. | The total, before splitting into earnings and basis. |
| Box 2 | Earnings, figured with the earnings ratio in the proposed regulations and IRS notices. A loss is entered only in the final distribution year; otherwise zero. | Only this part can be taxable. |
| Box 3 | Basis. For QTPs and Coverdell ESAs, box 3 must equal box 1 minus box 2. | Your contributions coming back; not taxed again. |
| Box 4a | Trustee-to-trustee transfer, for example between programs or to an ABLE account. | A transfer is not a withdrawal for spending. |
| Box 4b | QTP to a Roth IRA transfer for the beneficiary. | New checkbox on the form. |
| Boxes 5a to 5c | Where the money came from: private QTP, state QTP or Coverdell ESA. | Shows the account type. |
| Box 6 | Designated beneficiary checkbox. | Checked if the recipient is not the designated beneficiary. |
| Coverdell box 7 | If earnings and basis are not reported for a Coverdell ESA, boxes 2 and 3 are left blank and the year-end fair market value goes in box 7. | You figure earnings yourself. |
How the payer figures box 2
The 1099-Q instructions say to use the earnings ratio described in the proposed regulations section 1.529-3 and in IRS Notices 2001-81 and 2016-13. If there is a loss and it is not the final year of distributions, the payer enters zero in box 2; a loss is shown only in the final year. Earnings are not subject to backup withholding. For a Coverdell distribution with a returned contribution plus earnings, two forms may be filed, and box 2 may include earnings on excess contributions with code 2 or 3 in box 7.
From box 2 to taxable income
Publication 970 says the gross distribution on each Form 1099-Q is divided between earnings (box 2) and basis, the return of investment (box 3). To see whether earnings are taxable, compare the total of all QTP distributions for the year with adjusted qualified education expenses: AQEE is qualified expenses reduced by tax-free educational assistance. Multiply box 2 by AQEE over total distributed, subtract that from box 2, and include the rest in income on Schedule 1 (Form 1040), line 8z.
The Publication 970 example
Publication 970 shows a student with $8,300 of qualified expenses, $3,100 of tax-free scholarship and a $5,300 QTP distribution. AQEE is $5,200. With $950 of earnings in box 2, tax-free earnings are $950 times $5,200 over $5,300, or $932, and $18 is taxable. The calculator above reproduces that. If AQEE is at least the distribution, none of the earnings is taxable.
Things the calculator does not do
It does not apply the extra rules for Coverdell ESAs, the coordination with American opportunity or lifetime learning credits (expenses used for a credit reduce AQEE), or the 10% additional tax that can apply to a taxable distribution. Publication 970 covers those. A tax preparer can confirm the result.
Where next
See the related Form 1099-Q box 3 page in the 1099-Q box 3 decoder, and compare with 1099-R distribution codes.
Sources
- Instructions for Form 1099-Q: Boxes 1 to 6; Coverdell ESA reporting.. Read November 2, 2026. (IRS page last reviewed April 30, 2026.)
- Publication 970 (2025): Figuring the Taxable Portion of a Distribution, Example 1.. Read November 2, 2026. (IRS page last reviewed April 30, 2026.)
Line and box numbers are those printed in the IRS instructions named above and can change from year to year; match each box by its label.
Frequently asked questions
What is box 2 on Form 1099-Q?
Box 2 is the earnings included in the gross distribution reported in box 1.
Is 1099-Q box 2 taxable?
Only to the extent the distribution exceeds adjusted qualified education expenses. Publication 970 gives the formula.
How do I report taxable 529 earnings?
Include the taxable earnings on Schedule 1 (Form 1040), line 8z.
Why is box 2 zero?
The payer enters zero if there are no earnings, or if there is a loss and it is not the final distribution year.
How does box 3 relate to box 2?
For QTPs and Coverdell ESAs, box 3 basis must equal box 1 minus box 2.
Not tax advice
This page summarizes IRS instructions, mostly written for the people who prepare the form, and is not tax, legal or financial advice. The payer, a CPA or an enrolled agent can confirm what a box or code means for your return. Everything runs in your browser; nothing you enter is sent anywhere.