How far out off the wall framing do gypsum panels for the ceiling need to be?
Drywall (or sheetrock) on the ceiling is installed tight against the wall framing with hopefully less than 1/2" gap. Any gap larger than this removes the support you'll provide later.

The drywall installed on the walls is next installed on the top half of the wall pressed against the ceiling drywall which gives it support. Then the bottom half of the drywall on the walls is install tight against the board above with joints offset. Any gap at the floor is covered with trim.