topic 529 rollover to Roth and California taxes in Education

529 rollover to Roth and California taxes

lizza — Fri, 22 Nov 2024 21:57:27 GMT

I'd like to roll unused 529 funds to my son's Roth IRA. The plan is in California, but my son lives and pays taxes in NY. Will the fact that California considers this a non qualified distribution subject to taxes apply?

Re: 529 rollover to Roth and California taxes

Hal_Al — Fri, 22 Nov 2024 22:50:13 GMT

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/

Re: 529 rollover to Roth and California taxes

lizza — Sat, 23 Nov 2024 00:00:59 GMT

thank you for the quick reply

Re: 529 rollover to Roth and California taxes

taxmacometh — Thu, 30 Jan 2025 22:32:21 GMT

So - if one lives in one of these states like CA and NY that doesnt yet conform to federal law, then how do you enter your 1099-Q in turbotax so that state tax will be taken out, but not federal tax?

Re: 529 rollover to Roth and California taxes

AmyC — Thu, 30 Jan 2025 23:44:31 GMT

It depends on the state. CA asks for it to be reported as an adjustment. In CA, follow these steps:

go to here's the income that California handles differently.
Scroll down to the Miscellaneous section.
Select the expanded use of 529.
Answer the elementary school question
The next will ask for the excluded income from federal. Enter the taxable portion only.

Re: 529 rollover to Roth and California taxes

Manuel J — Thu, 26 Feb 2026 03:40:20 GMT

Can you clarify the section 4 point? Would the 2,500 be entered in 4 and 5? Or just 5?

Re: 529 rollover to Roth and California taxes

AmyC — Fri, 27 Feb 2026 01:02:05 GMT

I am so sorry, the elementary school question must be seen and passed (it could be a blank or you may need to select no) to get to where you enter the rollover. On Sch CA for CA other income statement, your rollover will show on line 4b.

Line 4a should be blank - the elementary school part