"New York 529" rollover to Roth IRA

[slamny]

My daughter has $2500 earned income from summer job in 2024. Can she open a Roth IRA account now and I instruct the 529 to rollover to her Roth IRA? Or, it is too late, even the tax deadline is April 15. If doing it now, would it consider 2024 tax or 2025 tax? If treated tax year 2024, do I have to wait for the 1099Q? How does it work and where to put into the New York  tax in Turbo Tax ?

[KrisD15]

Since this is a new tax regulation, the particulars on a 529 plan rolled over to Roth IRA are still cloudy, so verify with the plan trustee, however I assume a rollover done in 2025 can count as a contribution for tax year 2024 if done before the due date of the return (April 15, 2025) just like any other contribution. 

If you receive form 1099-Q,  you would not report/enter it. Keep it with your tax file. 

For your New York return, you will get to a "Changes to Federal Income" page where you would report the rollover distribution under "Education adjustments".  That will flow to Form IT-225

It needs to be a direct trustee-to-trustee rollover.

According to the IRS:
“A Roth IRA for the benefit of the same beneficiary, if the distribution is a direct trustee-to-trustee transfer from a QTP account that has been open for more than 15 years and the amount distributed does not exceed total contributions (and attributable earnings) made to the QTP more than 5 years before the distribution date.”
 

[slamny]

Since my daughter only has $2500 summer job income in 2024, can she take advantage of whole $7000 rollover or she only can do $2500?

[AmyC]

Two points:

1. $2500 of income allows a $2500 ROTH deposit. Any amount below that can open the ROTH.

2. A 529 rollover is allowed for 2024 until April 15, 2025 according to Saving for College. Note that the beneficiary must have earned income equal to at least as much as the amount transferred in any year.

A ROTH can be opened with less money but the 529 to ROTH can be the full income amount provided it meets all the requirements mentioned above.

[slamny]

I am not able to find the way to enter the earning portion of the 529 rollover to Roth on the New York State return Step by Step on TT. It only ask the total 2024 Contribution, total all nonqualified withdrals and total contributions for all years. Can you tell me the correct way? Thanks.

[KrisD15]

You would enter the amount of the earnings only as the nonqualified withdrawal. 

[slamny]

Eventhough it will work and reflect the on the tax form and I have to pay for the additional money. It will treated the earning portion as withdarw with recapture of prior contributions instead of earning portion of rollover to Roth IRA? Thanks.

[Hal_Al]

See:

https://ttlc.intuit.com/community/college-education/discussion/mesp-money-directly-transferred-to-ro...