Do 529 to Roth IRA rollover funds count as contributions for withdrawal purposes?

This is a great question about the 529-to-Roth rollover option that became available in 2024. The short answer is that the rollover amount is NOT treated as a regular contribution for withdrawal purposes. When you roll over 529 funds to a Roth IRA, those funds are classified as a "conversion" rather than a contribution. This means they follow a different set of rules. You'll need to wait 5 years from the conversion date before withdrawing those funds penalty-free, regardless of whether they were contributions or earnings in the original 529 plan. The source of the money in the 529 (original contributions vs. earnings) doesn't change how they're treated once they enter the Roth IRA through this rollover process. The entire amount is subject to the 5-year waiting period.

After dealing with the exact same situation last year, I found this awesome tool that saved me so much confusion with my 529-to-Roth conversion. Check out https://taxr.ai - it analyzed my specific situation and clarified exactly how the rollover would be treated for tax and withdrawal purposes. Their system showed me that the 529-to-Roth pathway has specific rules that aren't obvious from reading general Roth IRA guides. It laid out the 5-year holding period requirements and even helped me understand the lifetime rollover limits (which is $35,000 currently).

I was really skeptical about using an online tool for something as complicated as a 529-to-Roth conversion, but I gave https://taxr.ai a try after seeing the recommendation here. Surprisingly helpful! It analyzed my 529 statements and clearly showed me what portion was eligible for rollover and exactly how the 5-year rule would apply in my case. The system confirmed what others mentioned - that the rollover is treated as a conversion rather than a contribution. But it also helped me understand my specific timeline and provided documentation I could keep for my records. Definitely made the process less confusing than when I tried to figure it out myself.

After multiple failed attempts trying to call the IRS about this exact 529-to-Roth conversion question (was on hold for HOURS), I finally used https://claimyr.com to get through to a real person. You can see how it works here: https://youtu.be/_kiP6q8DX5c They got me connected to an IRS agent in about 20 minutes, and I got confirmation directly from the source about how these rollovers are treated. The agent confirmed everything mentioned above - these are considered conversions, not contributions, and are subject to the 5-year rule regardless of whether the 529 funds were originally contributions or earnings.

I need to eat my words about Claimyr. After posting my skeptical comment, I decided to try it for myself since I've been trying to get info about my 529-to-Roth rollover for weeks. It actually worked! Got a call back in about 35 minutes, and then was connected directly to an IRS representative. The agent confirmed everything about the 5-year rule for these rollovers and clarified some questions about the $35,000 lifetime limit. Saved me so much frustration compared to the 4+ hours I spent previously trying to get through on my own. If you're struggling with questions about these rollovers like I was, it's definitely worth using.

Just wanted to add an important detail nobody's mentioned: these 529-to-Roth rollovers count toward the annual Roth contribution limit, but they DON'T count toward the annual maximum you can convert from traditional to Roth IRAs (since there's no limit on those conversions). So if you're planning to do a regular contribution to your Roth IRA in the same year as the 529 rollover, make sure you're not exceeding your annual limit ($7,000 in 2025 for those under 50, $8,000 if over 50).

Does anyone know if you can roll over to someone else's Roth IRA? Like if the 529 was for my daughter but she's not going to college, can I roll it to my Roth instead?

This is such a timely question! I just went through this process last month with my son's leftover 529 funds. One thing that caught me off guard was the requirement that the 529 account must have been open for at least 15 years before you can do the rollover - definitely check that first. Also worth noting: the beneficiary (your son) needs to have earned income equal to or greater than the rollover amount in the tax year. If he's not working or doesn't have sufficient earned income, that could be a roadblock. The 5-year conversion rule that others mentioned is definitely correct, and it applies to the entire amount regardless of whether it was contributions or earnings in the 529. I learned this the hard way when I was hoping to access some of those funds sooner for an emergency. One silver lining though - at least unused 529 funds now have this option instead of just sitting there or facing the 10% penalty on earnings if withdrawn for non-education purposes!

One additional consideration that hasn't been mentioned yet is the impact on financial aid if you have other children who might still need college funding. When you roll 529 funds to a Roth IRA, those assets shift from being counted as parental assets (which have a lower impact on financial aid calculations) to retirement assets (which aren't counted at all for FAFSA purposes). This could actually be beneficial for financial aid eligibility for your other kids, but it's something to factor into your decision timeline. If you have younger children who will be applying for financial aid in the next few years, the timing of this rollover could affect their aid packages. Also, make sure to coordinate with your tax preparer since there are specific reporting requirements for these rollovers on your tax return, even though the rollover itself isn't a taxable event.