Secure 2.0 law says direct rollover from 529 to beneficiary's roth ira is not taxable for federal income tax. Why does TurboTax says it is taxable income?

Forum|Forum|1 year ago
February 4, 2025
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529 direct rollover to roth Ira is reported on Form 1099-Q. TurboTax accepts filling out this tax form yet it considers rollover as taxable. Why?

AmyC

Employee

Because you entered the form. Nontaxable rollovers should not be entered. IRS Publication 970, Tax Benefits for Education states on page 45: Don't report tax-free distributions (including qualifying rollovers) on your tax return.

Keep the tax form with your records but only enter if some portion is taxable.

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caishaoping

Thanks for the explanation. Just want to be sure that the appropriate action is to not report form 1099-Q, as long as it is qualified SECURE 2.0 transfer from 529 to Roth IRA.

Go forward, will TurboTax have an entry/checkbox to note such distribution as to roth IRA?

Thanks

Shao

KrisD15

You are correct, Form 1099-Q is not entered for the rollover.

I assume an option for a Roth Roll-over will be added to the program, but we are not given that information. We only know that for tax year 2024, it is not reported.

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