INDIANAPOLIS — A 529 is a tax-advantaged account that can help families save for education expenses.
Expenses can include high school, college or trade school tuition, even books.
But if a child does not need all of the money, it can put parents in a predicament.
New this year, families can rollover 529 funds into a Roth IRA under certain conditions. The update is a result of the Secure 2.0 Act.
To roll over funds, the 529 account needs to be open for at least 15 years. Beneficiaries of 529 college savings accounts can rollover up to $35,000 over the course of their lifetime from any 529 account in their name to their Roth IRA.
Rollovers are also subject to Roth IRA annual contribution limits. In 2024, it is $7,000.
But people who contributed to Indiana’s CollegeChoice 529 program might want to hold off on rolling over funds. Moving too quickly could stick them with bill.
That’s because people who contribute to Indiana’s CollegeChoice 529 Savings Plan may be eligible for a state tax credit.
Under current law, those state credits would need to be paid back.
State Rep. J.D. Prescott, R- District 33, authored a bill to prevent state tax credits from being recaptured during rollover.
“If we do not pass this legislation, our taxpayers will be subjected to a callback,” Prescott said.
A hearing is not yet scheduled for this bill.
“I don’t want to penalize them for saving for their financial future,” Prescott said “I want to make sure that they have options if they don’t utilize (funds) the way it was originally intended.”
In the meantime, talk to your tax professional about all and any 529 options if you are worried about money going unused.
