CollegeAmerica® tax information
Learn about CollegeAmerica contribution deductibility, gift tax guidelines and tax reporting for qualified and nonqualified distributions. When your client is ready to file their taxes, you can access their tax forms in Client Accounts and visit our Tax Center for additional resources.
Tax reporting
Distributions are reported to investors on Form 1099-Q. This form reports the total amount of the distributions, any earnings and the basis of the gross distributions (gross distributions minus earnings).
Form 1099-Q is mailed by January 31 of the year following the distribution, and the information is also reported electronically to the Internal Revenue Service (IRS).
If the new beneficiary is a family member of the current beneficiary, the change is considered a non-reportable and nontaxable event.
If the new beneficiary is not a family member, the move is considered a nonqualified, tax-reportable distribution from the prior beneficiary. A Form 1099-Q will therefore be generated under the owner’s Social Security number. The distribution may be subject to federal income tax and a 10% federal tax penalty on earnings.
Note: If the new beneficiary is more than 1 generation younger than the previous beneficiary, the generation-skipping transfer tax may be triggered. Your client may wish to consult a tax advisor.
For these purposes, the beneficiary’s family includes the beneficiary’s spouse and the following other relatives of the beneficiary:
- Son, daughter, stepchild, foster child, adopted child or a descendant of any of them
- Brother, sister, stepbrother or stepsister
- Father or mother or ancestor of either
- Stepfather or stepmother
- Son or daughter of a brother or sister
- Brother or sister of a father or mother
- Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law
- The spouse of any individual listed above
- First cousin
Yes, 1 rollover is allowed every 12 months from one 529 plan to another 529 plan for the same beneficiary. To qualify as a rollover, the funds must be invested within 60 days of the distribution.
Yes. Eligible CollegeAmerica assets can be rolled into a Roth IRA within certain limitations. For more information, review CollegeAmerica 529 to Roth IRA rollovers.
You may consult a tax advisor and/or refer to IRS Publication 970, Tax Benefits for Education.
Deductibility and gift limits
No, contributions are made with after-tax dollars. However, earnings can grow free from federal income tax.
Contributions are tax-deductible in certain states. For more information about state tax deductions, review the In state or out of state? 529 college savings plan tax guide.
Tax deductions may be disallowed in the event of nonqualified distributions.
A resident of Virginia who is the owner of a CollegeAmerica account may deduct contributions of up to $4,000 per account from their state taxable income. If more than $4,000 is contributed in 1 year, the remainder may be carried forward and deducted in future tax years. For account owners age 70 and older, the entire amount of any contribution may be deducted in the year contributed or in a future year.
There is no deadline. However, contributions count as gifts in the year in which they are made. Therefore, a contribution must be made by the last business day of the year to count as a gift for that year.
Yes, contributions to CollegeAmerica accounts are considered gifts by the IRS and may be subject to gift taxes. The amount the IRS permits to be excluded from the gift tax during a given year is based on the contributor’s tax-filing status. The gift tax exclusion limits for 2025 are:
Tax-filing status |
2025 limits |
|---|---|
Single |
$19,000 |
Single, with 5-year election* |
$95,000 |
Married, filing jointly |
$38,000 |
Married, filing jointly, with 5-year election* |
$190,000 |
* The 5-year election allows a contributor to gift up to their limit during 1 calendar year and treat the gift as having been made over 5 years. Additional gifts made to that beneficiary over the next 4 years after the year in which the one-time gift is made may reduce the donor’s lifetime gift and estate tax exemption. If the donor of an accelerated gift dies within the 5-year period, a portion of the transferred amount will be included in the donor’s estate for tax purposes.
Consult a tax advisor regarding your client’s specific situation.
A permissible change of beneficiary will be treated as a gift from the previous beneficiary to the new beneficiary if the new beneficiary is 1 or more generations younger than the beneficiary being replaced. If the account owner changes the beneficiary to a new beneficiary who is more than 1 generation younger than the previous beneficiary, the generation-skipping transfer tax may be triggered. If you have additional questions, consult a tax advisor.
Qualified and nonqualified distributions
Generally, qualified distributions are distributions used to pay for education expenses required for the enrollment or attendance of the beneficiary at an eligible educational institution. The CollegeAmerica account owner or beneficiary is responsible for verifying whether an expense is qualified. For help determining whether an expense is considered qualified, review CollegeAmerica qualified education expenses or the CollegeAmerica Program Description, and consult with a tax advisor for state-specific details.
If distributions are used for purposes other than qualified education expenses, the earnings will be subject to a 10% federal tax penalty in addition to federal and, if applicable, state income tax. States take different approaches to the income tax treatment of distributions. For example, distributions for K‑12 expenses may not be exempt from state tax in certain states. Consult a tax advisor for state-specific details.
No, federal or state taxes for penalties cannot be withheld.
Earnings on a distribution due to one of the following events are subject to federal income tax but not the 10% penalty:
- Death of the beneficiary
- Disability of the beneficiary
- Scholarship receipt (to the extent of the scholarship award)
You may consult a tax advisor and/or refer to IRS Publication 970, Tax Benefits for Education for additional exceptions.
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The guidelines and procedures provided in the Account Resource Center may not apply to networked accounts or accounts not directly held by American Funds. The guidelines and procedures provided also apply only to those retirement accounts or Coverdell ESAs invested in American Funds with Capital Bank and Trust Company (CB&T) as custodian. The guidelines and procedures provided in the Account Resource Center do not apply to plans held in our retirement plan solutions — PlanPremier, PlanPremier-TPA or RecordkeeperDirect. Information on the Account Resource Center may change periodically, and previously printed information may not be current. Please refer to capitalgroup.com for the most current information available.
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Depending on your state of residence, there may be an in-state plan that provides state tax and other state benefits, such as financial aid, scholarship funds and protection from creditors, not available through CollegeAmerica. Before investing in any state’s 529 plan, investors should consult a tax advisor.