Question about GA 529 plan and ABLE account rollover

[kbda]

Question about 529 plan rollover to ABLE account:  does Georgia have a provision to recapture state income tax deduction if a 529 plan is later rolled over to an ABLE account?  Georgia permits taxpayers to take a state income tax deduction equal to 20% of the annual 529 plan contribution, up to $4K per individual ($8K for a couple).  If the recipient of a 529 plan decides not to attend college or other postsecondary education, I understand that a 529 can be rolled over to an ABLE account for disabled individuals. If the 529 funds are rolled over to an ABLE account, does the state require repayment of any tax deductions obtained previously?

[LenaH]

No, there will be no recapture of tax when you transfer a 529 plan to an ABLE plan. Per the IRS, rollovers may be made without penalty from a section 529 tuition account to a section 529A ABLE account if the beneficiary of the ABLE account is the designated beneficiary of the tuition account or is an eligible member of the family. For more information, please see Publication 907. 

[Hal_Al]

Q. Does Georgia have a provision to recapture state income tax deduction for 529 plans?

A. Yes.

Q. Does it apply if the 529 money is later rolled over to an ABLE account? 

A.  Probably.  I cannot find a definitive answer to your question. I conclude that you are subject to recapture by omission. Rollovers to ABLE or even another 529 plan are not listed as "qualified expenses" for avoiding  recapture. They specifically say that a rollover to a Roth IRA is qualified (recently added provision).  I take the fact that other rollovers are not listed as meaning a Rollover to an ABLE account would be subject to the GA deduction recapture provision. 

You should contact the state tax people and/or 529 plan administrator for a definitive answer.  Please let us know what you find out.