Hal_Al
Level 15

Education

Q. Will the fact that California considers this (a 529 rollover to a Roth IRA) a non qualified distribution subject him to state income tax?

A. No. The fact that the plan is in CA is not relevant.  But the fact that New York also considers a 529 rollover to a Roth IRA as a non qualified distribution will subject  him to NY state income tax.

 

So far, "There are 21 states that have said that they will follow federal law: Alabama, Arizona, Delaware, Georgia, Hawaii, Idaho, Kansas, Kentucky, Maine, Maryland, Nebraska, New Mexico, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, South Carolina, Virginia, West Virginia and Wisconsin." Someone living in those states would not be subject to state income tax, even if it was a California based 529 plan. 

 

Reference: https://irahelp.com/slottreport/are-529-to-roth-ira-rollovers-subject-to-state-tax/