529 to Roth IRA: Rollover Rules, Conversion Guide, and FAQs

As of January 1, 2024, 529 plan account owners can roll over unused funds to a Roth IRA without incurring taxes or penalties, subject to certain limits.

This new option, introduced through Section 126 of the SECURE 2.0 Act, allows up to $35,000 in lifetime rollovers to a Roth IRA owned by the 529 plan beneficiary.

Rollovers must follow annual Roth IRA contribution limits ($7,000 for 2025, or $8,000 if the beneficiary is 50 or older), and the 529 account must have been open for at least 15 years.

This is welcome news for families concerned about leftover 529 funds and adds flexibility to how education savings can be used. Here’s what you need to know about the rollover rules and how to make the transfer.

What’s changed?

Before SECURE 2.0, 529 plan account owners or beneficiaries who wanted to withdraw funds for nonqualified education expenses would be forced to make a nonqualified withdrawal. The earnings portion of nonqualified withdrawals is subject to income tax and a 10% federal tax penalty.

With the new regulations, 529 plan account owners or beneficiaries can roll over 529 funds into a beneficiary-owned Roth IRA tax-free and penalty-free as of January 1, 2024, subject to the limitations described below. If you qualify, this can be a great way to help kick-start a beneficiary’s retirement savings.

Some grey areas in the statute remain subject to interpretation, and the 529 plan industry is awaiting further clarification and guidance. However, most 529 plans have begun processing rollover requests.

What is the annual limit for 529 to Roth IRA rollovers?

The rollover amount from a 529 plan into a Roth IRA account is subject to the IRS’s annual contribution limits. The annual Roth IRA contribution limit for 2024 and 2025 is $7,000 ($8,000 for people 50 and older).

Important: The beneficiary must have earned income equal to or greater than the rollover amount for that year. If they earn $4,000, they can only roll over $4,000, even though the annual limit is $7,000.

What is the lifetime limit for 529 to Roth IRA rollovers?

There’s also a $35,000 lifetime limit per beneficiary for 529 plan rollover contributions to Roth IRAs. Remember, you can’t transfer the full $35,000 at once. You can only transfer up to the annual limit each year.

For example, if you have $16,500 in your account, you could transfer $7,000 for the 2024 tax year (you have until Tax Day 2025 to make a 2024 contribution), $7,000 in 2025, and the remaining $2,500 in 2026. Tax- and penalty-free transfers can only be made if you meet the below-mentioned requirements.

Example: Sarah has $35,000 left in her 529 after graduating college. She earns $50,000 per year. In 2025, she can roll over $7,000 to her Roth IRA. She can continue rolling over $7,000 each year (or more, as Roth IRA annual contribution limits increase) until she reaches the $35,000 lifetime limit—completing the full rollover in about 5 years.

What rules apply to 529-to-Roth IRA rollovers?

Funds cannot be moved from a 529 plan into a Roth IRA without incurring penalties and taxes unless the account has existed for at least 15 years. Changing designated beneficiaries will also likely restart that 15-year clock.

Account holders and beneficiaries cannot roll over any contributions or earnings on contributions made in the last five years. In other words, the money transferred must have been in the account for at least five years, and the amount can’t exceed your balance from five years prior.

529-to-Roth IRA rollovers bypass the usual Roth IRA income limits. This means high earners who typically can’t contribute to a Roth IRA can use this rollover strategy to build Roth savings.

529 to Roth IRA rollover requirements at a glance

Are there state tax implications for 529 to Roth IRA rollovers?

Moving leftover 529 funds to a beneficiary’s Roth IRA can be a great way to help them build their retirement savings. However, there may not be a reason to rush to do so yet. In addition to unclear guidance to 529 plan managers on rules for these transfers, some states may not treat these rollovers as a qualified expense for state income tax purposes.

You can check whether your state recognizes transfers to a Roth IRA as a qualified expense using our 529 comparison tool.

If your state does not consider 529-to-Roth IRA rollovers a qualified expense, consult the plan or your tax advisor to understand the implications for you.

Remember that you always have other options for leftover 529 funds, such as keeping them for graduate school, changing the beneficiary, and more.

How do you roll over a 529 to a Roth IRA?

Step 1: Open a Roth IRA account

If the beneficiary doesn’t already have a Roth IRA account, open one. To proceed to step 2, you’ll need the new account number and information about the IRA administrator.

Important to note: You must set up the beneficiary listed on your 529 plan account as the owner of the Roth IRA account.

Step 2: Initiate a trustee-to-trustee rollover

Check your 529 plan provider’s website FAQs or call their customer support team for instructions on initiating a trustee-to-trustee rollover from your 529 to a Roth IRA. Most plans require you to complete a form for this transaction.

For the rollover to be federal tax-free, it must be paid through a direct trustee-to-trustee transfer. In other words, you cannot first withdraw the amount to be rolled over and then contribute that amount to the Roth IRA. If you try to do this, you will end up with an unqualified withdrawal subject to tax and penalty. As always, check with your tax advisor before initiating such a transaction.

How do you report a 529 to Roth IRA rollover on your taxes?

For qualified transfers to a Roth IRA from a 529 plan that meet the above requirements, you will enter the rollover amount in Box 10, Roth IRA Contributions, of Form 5498. Do not enter it in Box 2, Rollover Contributions.

Key takeaways

• The 529-to-Roth IRA rollover offers a tax-free way to repurpose unused education savings for retirement.
• You can transfer up to $35,000 over your lifetime, subject to annual Roth IRA contribution limits.
• The 529 account must be at least 15 years old, and only contributions made more than 5 years ago are eligible.
• High earners can use this strategy to contribute to a Roth IRA without income restrictions.
• Check your state’s tax treatment before initiating a rollover—some states may recapture deductions.
• 529 plans remain a valuable tool for college savings with increased flexibility through this new rollover option.

Frequently asked questions

Can I roll over 529 funds to my own Roth IRA if I’m the account owner?

No. The Roth IRA must be owned by the designated beneficiary of the 529 plan. As the account owner, you cannot roll over funds to your own Roth IRA—only the beneficiary can receive the rollover.

What happens if I change the 529 beneficiary?

Changing the beneficiary will likely restart the 15-year clock required for tax-free rollovers. The new beneficiary must wait 15 years from the date they became the beneficiary before initiating a rollover.

Do 529-to-Roth IRA rollovers count toward my annual contribution limit?

Yes. The rollover amount counts toward the annual Roth IRA contribution limit ($7,000 in 2025, or $8,000 if age 50+). If you’ve already made regular Roth IRA contributions for the year, you cannot exceed this limit with a 529 rollover.

Can I roll over 529 funds if I have a high income?

Yes. Unlike regular Roth IRA contributions, 529-to-Roth IRA rollovers are not subject to income limits. This makes it an attractive option for high earners who would otherwise be ineligible to contribute to a Roth IRA.

Will my state recapture tax deductions if I roll over 529 funds?

It depends on your state. Some states do not treat 529 to Roth IRA rollovers as qualified expenses and may require you to pay back previously claimed state tax deductions. Check your state’s rules using our 529 comparison tool.

Can I withdraw 529 funds and then contribute them to a Roth IRA?

No. To qualify for tax-free treatment, the transfer must be a direct trustee-to-trustee rollover. If you withdraw the funds first and then contribute them to a Roth IRA, it will be treated as a non-qualified withdrawal subject to income tax and a 10% penalty.

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