States That Don't Tax 529-to-Roth Rollovers

[toddthebod]

You have to love California's attitude of tax first and ask questions later. There is absolutely nothing stopping you from moving your California 529 account to any state that will not impose the 2.5% surcharge. As California does not provide any sort of tax benefits for use of a 529, there's no incentive not to do this.

It's not just moving CA 529 plan, one would have to move physically as well

Fair enough. I'm looking at this from a perspective of someone using the ScholarShare 529 but not living in California.

One has nothing to do with the other. A Nevadan who uses the California ScholarShare 529 and takes a non-qualified distribution is not taxed by the state of California.

It sounded like you would have to pay the 2.5% surcharge anyway even if you are a non-California resident.

No. The 2.5% surcharge has nothing to do with the ScholarShare plan.

[cowbman]

Good to hear. Interesting plan California has where it's more beneficial to have their plan if you live out of state and more beneficial for in-state residents to hold other state plans.

[calwatch]

The California treatment of 529s is essentially the same as a non-deductible IRA. The California treatment of HSAs is that they don't exist at all.

[toddthebod]

The California treatment of 529s is essentially the same as a non-deductible IRA. The California treatment of HSAs is that they don't exist at all.

That doesn't make any sense. A California 529 can be spent on qualified education expenses with no taxes on earnings. A non-deductible IRA is always taxed on earnings.

[toddthebod]

Good to hear. Interesting plan California has where it's more beneficial to have their plan if you live out of state and more beneficial for in-state residents to hold other state plans.

Neither of those things are true.

[Beachey]

I was checking my NY 529 Account and saw this notice. I have not seen any mention in the media but of interest in this thread.

Effective September 5, 2024, New York State law was amended to include distributions for Qualified Loan Repayments and Roth IRA Rollovers as New York Qualified Withdrawals. Accordingly, distributions for Qualified Loan Repayments and Roth IRA Rollovers made on or after this date will have no New York State tax impact.

Now we just need K-12 education.