Lucho Posted February 13, 2011 Report Posted February 13, 2011 Taxpayer withdraw the whole balance from a ESA account (close to $1000.00) but did not use the money for tuition or anything related for education purpose; there is no earning reported in Bx. 2 of 1099-Q, just $distribution amount in box 1 and the distribution code is #1 She opened the plan 7-8 years ago. According to what I read in Pub. 970 the whole amount is taxable (even though the contribution was an after tax money) or I am wrong? Any help will be appreciated. Lucho Quote
kcjenkins Posted February 14, 2011 Report Posted February 14, 2011 No the original contribution is not taxable, only the earnings are taxable. If there were no earnings, or even a loss, then there is no taxable amount in box 2, which is the box that you put on line 21. And if there is a loss, they may even have a deduction, although it's a Sch A deduction and seldom worth the trouble, in my experience. Quote
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