529 Plan to Roth IRA Rollover Rules Under SECURE 2.0

Leftover money in a 529 college savings account can now be rolled into the beneficiary’s Roth IRA without tax or penalty, up to a lifetime cap of $35,000 per beneficiary. The 529 to Roth IRA rollover rules were created by Section 126 of the SECURE 2.0 Act and apply to distributions made after December 31, 2023.¹ Each year’s transfer counts against the beneficiary’s regular Roth IRA contribution limit, so hitting the $35,000 ceiling takes several years at minimum.

Who and What Qualifies

Three conditions in 26 U.S.C. § 529(c)(3)(E) all have to be satisfied before any money moves.²

The 529 Must Be at Least 15 Years Old

The account has to have been open for 15 years before the rollover distribution. The clock starts on the date the 529 was originally established, not the date any particular contribution went in. A 529 opened in 2010 first became eligible in 2025. Ask your plan administrator for the exact account opening date on file, because being off by a few months is enough to disqualify a transfer.

The Five-Year Lookback on Contributions

Even inside a 15-year-old account, contributions made within the last five years cannot be rolled over. Neither can the earnings attributable to those recent contributions.² Only contributions older than five years, plus the growth on those older contributions, are eligible. Figuring out how much of the balance qualifies means pulling the full contribution history and identifying each deposit by date and amount.

The Roth IRA Has to Belong to the Beneficiary

The receiving Roth IRA must be in the name of the 529’s designated beneficiary. A parent who owns the 529 for their child cannot roll the funds into the parent’s own Roth IRA. The beneficiary’s name and Social Security number have to match on both accounts, and both institutions should confirm the match before the transfer is initiated.

How Much Can Move Each Year

The $35,000 cap is a lifetime limit per beneficiary, not per 529 account. If a beneficiary is named on more than one 529, the total rolled from all of them combined cannot exceed $35,000.¹ Once the aggregate reaches that ceiling, no more rollovers are allowed for that beneficiary.

Each year’s rollover is separately capped at the Roth IRA annual contribution limit, and that limit is shared with any contributions the beneficiary makes on their own. For 2026 the limit is $7,500 for most people and $8,600 for those age 50 and older.³ If the beneficiary already put $3,000 of their own money into a Roth IRA in a given year, only the remainder of the annual limit is available for a 529 rollover that year. Going over the combined limit triggers a 6% excise tax on the excess for every year it remains in the account.⁴ At current limits, reaching $35,000 takes at least five years, and longer if the beneficiary is also making their own contributions.

The Open Questions the IRS Has Not Answered

A few important pieces of the rule are still unsettled because the IRS has not issued formal guidance.

The first is what happens when the 529’s beneficiary is changed. Changing the designated beneficiary may restart the 15-year clock.² The statute references a program maintained “for the 15-year period ending on the date of such distribution” for a specific “designated beneficiary,” which most tax professionals read as tying the 15 years to the current beneficiary. Families who set up an account for one child and later moved it to a younger sibling should assume, for now, that the clock restarted on the change date and keep records of when it happened.

The second is earned income. Regular Roth IRA contributions require earned income at least equal to the amount contributed. The 529 rollover statute cross-references the standard Roth contribution framework in section 408A(c)(2), which includes the earned income rule.² Most advisors treat the requirement as applying to rollovers, so the safer course is to limit each year’s rollover to what the beneficiary actually earned. A student with a $5,000 summer job should cap that year’s rollover at $5,000.

The third is income phase-outs. Single filers whose modified adjusted gross income exceeds $168,000 in 2026 normally cannot contribute directly to a Roth IRA. The rollover statute references only the dollar cap in section 408A(c)(2), not the income phase-outs in section 408A(c)(3), and the Senate Finance Committee summary describes the rollovers as “subject to Roth IRA annual contribution limits” without mentioning income limits.¹ Practitioners generally read that as meaning high-earning beneficiaries can still receive a rollover. Future IRS regulations could confirm or narrow this reading.

How to Execute the Rollover

The transfer has to be a direct trustee-to-trustee transfer from the 529 to the Roth IRA. If the money passes through the beneficiary’s hands first, it becomes a non-qualified 529 distribution, and the earnings portion gets hit with income tax plus a 10% penalty.⁵

Contact the 529 plan administrator and ask for their rollover form. You will need the Roth IRA account number and the receiving custodian’s routing details. Ask whether the plan sends the money electronically or by check made payable to the Roth IRA custodian.

Two forms document the transaction. The 529 administrator issues Form 1099-Q, which has a specific checkbox for a direct trustee-to-trustee transfer to a Roth IRA.⁶ The Roth IRA provider issues Form 5498 confirming the contribution was received. Keep both. Check the Roth IRA balance once the transfer clears to confirm the full amount arrived.

Watch for State Tax Recapture

Federally, a properly executed rollover is tax-free and penalty-free. State treatment can be different. Many states give an income tax deduction or credit for 529 contributions, and some of those states do not treat a Roth IRA rollover as a qualified use of the funds. In those states, rolling money out can trigger recapture of the deduction you originally claimed on the contributions being moved.

Before initiating a transfer, check how your state treats 529-to-Roth rollovers. If your state recaptures the deduction, calculate what that costs against the long-term value of getting the money into a Roth. The rollover can still be worth it, but the state tax bill should be part of the decision rather than a surprise later.

Planning Moves That Make the Rule Useful

The single biggest planning move is opening the 529 early. Because the 15-year clock runs from the account opening date, a 529 opened at a child’s birth passes the 15-year mark before high school ends, which preserves the rollover option for any leftover balance. Parents who wait until a child is a teenager may find the account too new to qualify when college is over.

If you have paid all the tuition bills but the child is still young, think twice before closing the account. Emptying and closing the 529, then opening a new one for a future purpose, restarts the 15-year clock. Keeping a small balance in the original account preserves the older opening date. Front-loading contributions in the account’s early years also helps, since the five-year lookback means older contributions are the ones that become rollover-eligible first.

Keep detailed records: the account opening date, every contribution date and amount, any beneficiary changes, and the running total of rollovers across all tax years. The IRS tracks the $35,000 lifetime cap through the reported forms, and reconstructing years of history after the fact is harder than logging it as it happens.

1
United States Senate Committee on Finance. SECURE 2.0 Act of 2022 Section-by-Section Summary
2
Office of the Law Revision Counsel. 26 USC 529 – Qualified Tuition Programs
3
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
4
Internal Revenue Service. Retirement Topics – IRA Contribution Limits
5
MEFA. 529 Withdrawals Penalties
6
Internal Revenue Service. Instructions for Form 1099-Q