Here are a few things you’ll want to know about 529 Account to Roth IRA transfers:

• The 529 account must have been open for more than 15 years.
• The funds must be rolled over to a Roth IRA owned by the 529 account beneficiary.
• The rollover amount cannot exceed the annual IRA contribution limits (minus any other contributions to any IRA owned by the beneficiary).
• The beneficiary’s income in the year of the rollover must be at least equal to the amount of the rollover.
• The eligible rollover amount must have been in the 529 account for at least 5 years.
• There’s a $35,000 lifetime cap on Roth IRA rollovers for each 529 account beneficiary.
• Roth IRA income limitations are waived for 529-to-Roth IRA Rollovers.

The U.S. Treasury Department and IRS may issue future guidance interpreting these conditions. Any guidance could affect the tax treatment of 529 to Roth IRA rollovers. Consult with a tax professional for more information.

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What other options are there for leftover 529 funds?

• The money you invested can stay in the account. It can still have the opportunity to grow tax-deferred until your child decides to attend college or graduate school in the future. There is currently no time limit on when funds must be withdrawn. 
• You can pay up to $10,000 in payments for qualified student loans for the 529 account beneficiary (student) or their sibling.
• You can transfer the savings to another eligible family member,[1] such as a sibling or even yourself–you could use it for your own higher education!
• Withdraw the money and use it however you like. You will need to pay taxes on any earnings, plus a 10% penalty of those earnings. The penalty doesn’t apply if:
  • The beneficiary receives a scholarship. You can withdraw up to the amount of the scholarship from your account without penalty.
  • The beneficiary becomes disabled.
  • The beneficiary dies and the withdrawal is paid to the beneficiary’s estate.

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[1] Some restrictions apply. You generally are permitted to change the beneficiary to another qualified member of the family, as defined under the Internal Revenue Code, without triggering income tax and 10% additional federal tax. Not applicable for accounts opened under a Uniform Gifts/Transfers to Minors Act registration.

USRRMH0124U/S-3311326

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