Remember These Open Questions When Executing 529-to-Roth Rollovers in 2024

Under the SECURE Act 2.0, beginning with the 2024 tax year, taxpayers are officially permitted to roll Section 529 plan dollars into a Roth IRA if certain conditions are met. Currently, the lifetime transfer limit on 529-to-Roth rollovers is capped at $35,000. However, it isn’t clear whether the $35,000 amount will be indexed for inflation. Further, it isn’t clear whether the limit is applied on a per-beneficiary basis or applies to each funding taxpayer. For example, the IRS has not provided any guidance on whether a parent who funds 529 plans for two children would be entitled to roll over a maximum of $35,000 or $70,000 ($35,000 per beneficiary). The 15-year qualification period has also generated questions. Taxpayers who maintain Section 529 plans are permitted to change the account beneficiary. However, the IRS has not clarified how the 15-year period is calculated when the taxpayer opts to change beneficiaries. It is unclear whether a new 15-year waiting period will be required starting from the date the beneficiary is changed, or whether the period that began on the date the account was opened will be transferred). For more information on the 529-to-Roth rollover option, visit Tax Facts Online. : Q 690. Note: Q is updated.