I was looking at NY's 529 last night and saw on the comparison page here::
New York follows tax-free treatment for rollovers except that, according to a New York State Dept. of Taxation and Finance interpretation, a rollover out of a New York 529 plan is treated as a nonqualified withdrawal. A direct trustee-to-trustee rollover between two New York 529 accounts is not treated as a nonqualified withdrawal for this purpose.
And on NY site: :
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 New York State tax deductions previously taken.
Am I mistaken? a 529 like NYchanges their performance, fees, quality of customer service and you want to move to another state... It's a taxable event? Now you'z can't leave.
Is that accurate?
Is that common with other states?
I know there's IRS rules about moving too often in a 12 month period. But I'm thinking a 1 time, move all of it to another state type of situation.
I'm in NJ, so there's no tax deduction issues for me. I saw a many year old post here about this (so it isn't new! Very disheartening)... where the person asking was in MA for the NY fund. Someone replied that since you aren't a NY resident / don't file NY taxes, it's a non-issue for you.
Uh, a state wants their money, they will get it! They may not now, but at some point have the 529 withhold the taxes on the rollout. Or because you are doing business 'in' NY with this 529, they interpret it to mean you have to file a NY return.
THANKS!
