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.htmlAs 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-planHow 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.