NY 529 income tax at rollver?

[Scandium]

I live in MD, and fund a NY state 529 account. I got curious about this phrase:

"Rollovers are subject to New York State tax on earnings
A rollover of assets from your Direct Plan account to a 529 plan in another state is subject to New York State income tax on earnings, as well as the "recapture" of all previous New York State tax deductions made during the life of the account."
from: https://www.nysaves.org/home/why-ny-529-direct-plan/tax-benefits.html

As I don't have any state tax deductions I'm most interested in the bolded part. If I'm reading this right it means that if I for some reason want to roll these funds to anther 529, rather than using it for edu expense, I would have to pay NY income tax on any gains, even though I'm not a NY resident? Is that correct?

there is also:
"a rollover out of a New York 529 plan is treated as a nonqualified withdrawal."
https://www.savingforcollege.com/529-plans/new-york/new-york-529-college-savings-program-direct-plan

How big of a drawback is this? It seems to me this would trap my money in the NY529 account until they can be used for education. It would cost me taxes to roll it to another state, if for some reason I'd want to do that.. I'm not sure which scenario that would be? If a state offers tuition benefits from paying from their state's 529, not sure if that occurs?

(also posted to bogleheads. Apologize if anyone see it twice..)

Edit: received response from NYsaves. Lots of general info, most relevant was this [bold mine]:
Note: If you are a New York taxpayer, a rollover of assets from New York's 529 College Savings Program to a 529 plan in
another state will be subject to New York State income tax on earnings, as well as the recapture of previous New York tax
deductions taken for contributions to the account.

So it appears income tax and recapture ONLY applies to NY tax payers. Unlike there general language on their website! (perhaps they expect most using it are NY residents?) Good news regardless.

[ctuser1]

I've seen this crop up many times, never seen any satisfactory workaround.

Let me ask this question first before you get asked here by someone else or in Bogleheads, why do you need to money off the NYS 529? They have vanguard funds with low fees. Why not just leave it there till you need to use it for the intended purpose (i.e. college)?

[Scandium]

I've seen this crop up many times, never seen any satisfactory workaround.

Let me ask this question first before you get asked here by someone else or in Bogleheads, why do you need to money off the NYS 529? They have vanguard funds with low fees. Why not just leave it there till you need to use it for the intended purpose (i.e. college)?

That's basically what I'm wondering; I don't see this limitations as a major issue, but is there any scenario I'm not foreseeing where it's a big problem? Going to college in a state where using their 529 plan gives you a discount, is that a thing? If we don't use it all for college and I want to tap it in my retirement, could rolling it to a different plan be beneficial? I don't know, but just want to check before I tie my money up.. The only other decent plan I know of is Utah, I don't know what their terms are.
thanks

[ctuser1]

The only other decent plan I know of is Utah, I don't know what their terms are.

https://my529.org/other-essentials/rollovers/

Utah taxpayers who roll over funds from my529 to another state’s 529 plan must add back the amount of the rollover as income on their Utah state income tax form for the taxable year the rollover is made.

Seems to me like it could be interpreted in a few different ways.

I don't see this limitations as a major issue, but is there any scenario I'm not foreseeing where it's a big problem? Going to college in a state where using their 529 plan gives you a discount, is that a thing? If we don't use it all for college and I want to tap it in my retirement, could rolling it to a different plan be beneficial?

I doubt that is a thing any more. The discount programs used to be for pre-paying.

But who knows? Maybe some state will start offering some new discount etc for having their 529. I don't think you can plan for any of that in advance.

Using 529 for retirement - that seems like a wasteful use of it!! You should only fund 529 after maxing out all retirement accounts available + HSA. If you do so - then you should not have to use 529 for retirement.

529 plans are also fantastic tools for wealth transfer to kids and kids kids. So they are much more tax efficient (compared to other means) of passing on inheritance.

With maxed our retirement accounts, and 529 being such a fantastic wealth transfer tool - I just don't see why you'd use them for retirement, ever!!

[Scandium]

Thanks.

But who knows? Maybe some state will start offering some new discount etc for having their 529. I don't think you can plan for any of that in advance.

Using 529 for retirement - that seems like a wasteful use of it!! You should only fund 529 after maxing out all retirement accounts available + HSA. If you do so - then you should not have to use 529 for retirement.

529 plans are also fantastic tools for wealth transfer to kids and kids kids. So they are much more tax efficient (compared to other means) of passing on inheritance.

With maxed our retirement accounts, and 529 being such a fantastic wealth transfer tool - I just don't see why you'd use them for retirement, ever!!

Thanks, good points.
Note that I update the OP with email response from NY 529. They specified that the rollover tax only applies to NY tax payers (unlike their website), so I wouldn't have to pay anything (unless I move to NY at some point I guess).