529 to Roth IRA rollover triggers an excess contribution due to MAGI - should it not be reported?

nosegopher
nosegopher Member Posts: 1 Newcomer
in Filing my taxes

I rolled over $7,000 through a qualifying 529 to Roth IRA trustee-to-trustee transfer, but FreeTaxUSA reports this as an excess contribution because of my MAGI.

However, 529 to Roth IRA contributions can be made regardless of MAGI provided they're qualifying (under the annual limit, under the $35,000 lifetime limit, etc.)

How should this be reported in the IRA contributions amounts page?

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Best Answer

  • TriciaD
    TriciaD FreeTaxUSA Agent Posts: 44 image
    Answer ✓
    Hello nosegopher,

    You're correct that 529-to-Roth IRA rollovers under SECURE Act 2.0 are not subject to MAGI limits. The excess contribution message is most likely appearing because the rollover is being entered on the IRA contributions page, which applies the standard MAGI rules for regular Roth IRA contributions. The fix is to enter it through a different section of the software.

    Here's how to report it correctly:

    1. Go to Income and select Tuition Program Distributions (1099-Q)
    2. On the first screen, answer No to the question about qualified education expenses (a rollover is not a qualified education expense)
    3. Click "Add a 1099-Q" and enter the distribution details from your 1099-Q form
    4. Continue to the next page
    5. When asked "Did you roll over this 529 distribution?", answer Yes
    6. Enter the rollover exclusion amount

    If you're entering it this way and are still seeing an issue, please sign into your FreeTaxUSA account and contact Customer Support. They will be happy to help you further.

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