Inquiry Regarding Editor, September 12: Inquiring About Tax Implications of Rolling Over 529 Plans into Roth IRAs
In a series of informative Q&A sessions, various tax-related topics have been addressed, including QCDs, Roth IRA conversions, 529 plans, Inherited IRAs, IRAs, RMDs, and PTPs. These sessions are designed to provide general information and should not be considered as independent financial, legal, or tax advice.
One topic that has garnered particular interest is the transfer of funds from a 529 plan to a Roth IRA. Here are some key points to consider:
- If an individual is the beneficiary of two 529 plans, the lifetime cap on direct trustee-to-trustee transfers to a Roth IRA is $35,000, not $70,000. It's important to note that this limit applies per person, not per 529 account.
- The beneficiary of a 529 plan cannot transfer funds to a Roth IRA if they have no taxable compensation for the year. In other words, they must have earnings or income to qualify.
- To complete the transfer, the beneficiary must have taxable compensation equal to or greater than the 529 amount being transferred.
- The rules for multiple 529 plan rollovers into a Roth IRA in 2025 were established by the U.S. federal tax authorities, specifically the IRS, as part of changes in tax legislation.
For readers seeking more in-depth information on tax topics, subscriptions to The Kiplinger Tax Letter, The Kiplinger Letter, and The Kiplinger Retirement Report are available. These publications provide an excellent opportunity for readers to ask questions about tax matters.
Questions about tax topics can be submitted to Joy Taylor, a contributor to The Kiplinger Tax Letter, The Kiplinger Letter, and The Kiplinger Retirement Report. Not all questions may be published, and some may be condensed and/or combined with other similar questions and answers.
In conclusion, understanding the intricacies of transferring funds from a 529 plan to a Roth IRA can be complex. However, with the right information and resources, it is possible to navigate these tax matters effectively.
