Secure 2.0 law says direct rollover from 529 to beneficiary's roth ira is not taxable for federal income tax. Why does TurboTax says it is taxable income?

[justinrosales2]

529 direct rollover to roth Ira is reported on Form 1099-Q. TurboTax accepts filling out this tax form yet it considers rollover as taxable. Why?

[AmyC]

Because you entered the form. Nontaxable rollovers should not be entered. IRS Publication 970, Tax Benefits for Education states on page 45: Don't report tax-free distributions (including qualifying rollovers) on your tax return.

Keep the tax form with your records but only enter if some portion is taxable.

[caishaoping]

Thanks for the explanation.  Just want to be sure that  the appropriate action is to not report form 1099-Q, as long as it is qualified SECURE 2.0 transfer from 529 to Roth IRA.  

Go forward, will TurboTax have an entry/checkbox to note such distribution as to roth IRA?

Thanks

Shao

[KrisD15]

You are correct, Form 1099-Q is not entered for the rollover. 

I assume an option for a Roth Roll-over will be added to the program, but we are not given that information. We only know that for tax year 2024, it is not reported.