529 to Roth Conversion in New Jersey

Forum|Forum|1 year ago
August 27, 2024
2 replies
2 views

We plan to convert moneu from son's 529 to Roth IRA in 2024. We meet ALL the requirements. Part of the converted money will be earnings on the money we deposited. Will Turbo Tax be able to handle this type of transaction for:

Federal - nothing is taxable

New Jersey - What we deposited into the 520 is not taxable because it was after tax money. But I can't figure out if the earnings are taxable. Will TurboTax know how to handle it?

TurboTax Premier Online

NCperson

Level 15

@Diane77 because of the Turbo Tax Warrantee, that unless Turbo Tax explicitly states there is a particular form they do not cover, you have to trustTurbo Tax will know how to handle it, otherwise they pay the penalties and interest on the mistake.

So I wouldn't worry about it...

user17712012540

Level 2

Is the conversion from 529 to Roth taxable in NJ? Right now my child does not have $10K of income but depending on the treatment of the roth conversion he might surpass that limit

MarilynG

Level 15

A conversion from a 529 to Roth is a non-taxable event for both Federal and New Jersey. Your child (or you) needs to keep Form 5498 as documentation, reporting the conversion from the 529. You don't need to report the conversion in your tax return.

For any further contributions to their Roth, your child will need earned income (taxable compensation) to contribute to a Roth IRA. Their total contributions for the year cannot exceed 100% of their earned income, or the annual limit ($7,500 for 2026).

What Counts as Earned Income?