529 to Roth Rollover in Massachusetts

[AnitaPS]

Hi,

I've read some of the 529 to Roth Rollover questions and answers and none of them answer my question.  According to some questions, since the rollover is considered a qualified distribution, you don't have to include the 1099-Q on your taxes.  However, in Massachusetts, it is not clear that the rollover is a qualified distribution and you may have to pay taxes on any earnings.  

I was able to enter the 1099-Q and the federal tax seems to be ok with it, but the state chokes, says it doesn't know how to handle and freezes, leaving me unable to file either form electronically.  I'm wondering if I should just print it and mail it in, but then I will have the same problem next year.

Thanks,

Anita

[AmyC]

As long as you met the federal requirements (15-year account age, 5-year contribution age, earned income, and annual limits), Massachusetts considers it a tax-free event.

MA Tax Treatment: Effective for tax years beginning after December 31, 2023... distributions from a 529 plan that are rolled over to a Roth IRA are not included in Massachusetts gross income when they are excluded from federal gross income.

You are correct, the Q is not required but should be kept along with the paperwork. IRS Publication 970, Tax Benefits for Education states that nontaxable distributions should not be entered.

[user17749835632]

Thank you so much!