Yes. For NY, the 529 earning and prior deductions must be claimed. Please see page 5 for NY filing requirements. He may not be required to file a NY return.
The NY 529 plan stays out of qualified/ non-qualified. They just distribute the money. You can read this on Page 19 of NYs 529 plan booklet, which says: For New York State taxpayers, Qualified Rollovers will be subject to New York State income taxes on the earnings portion, as well as the recapture of any previous New York State tax deductions taken for contributions to the Account. See Section 7. Important Tax Information—New York State Tax Information.
Then your responsibility kicks in on, page 36, where section 7 simply says:
Because it is your responsibility to verify contributions, withdrawals, and transfers, it is important for you to keep all records, invoices, and other documents regarding your Account to support: • Expenses that you claim to be Qualified Higher Education Expenses, K–12 Tuition Expenses, Apprenticeship Program Expenses, or Qualified Loan Repayments. • Withdrawals because of the death or Disability of, or receipt of a Qualified Scholarship by, your Beneficiary. • The earnings component of and compliance with the timing requirements applicable to Qualified Rollovers. • The earnings component of contributions funded from Qualified U.S. Savings Bonds or education savings accounts. • Refunded Distributions.
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