05 Apr Are there tax implications for moving a 529 plan?
Q. Are there possible tax implications if I move my current 529 plan from NJBEST to another financial institution? Are there any specific benefits to leaving it with NJBEST besides the $1,500 scholarship?
— Planning ahead
A. You’re in luck.
The IRS allows you to move your 529 account from one plan to another for the same beneficiary, tax free, once in a 12-month period, said Deva Panambur, a certified financial planner with Sarsi, LLC in West New York.
There could be many reasons to move a 529 plan, he said, including: moving to a new state that gives income tax benefits on rollovers from another state, consolidating 529 accounts or finding a different state’s plan offers other benefits.
“Since New Jersey does not give tax benefits for 529 contributions, there is no risk of recapture of state tax benefits,” he said.
Panambur said the New Jersey plan may charge a fee as much as $75 for rollover distributions, although no fee is listed in the December 2018 Investor Handbook.
“As you mention, depending on the amount of contribution and how long the account has been open, eligible beneficiaries of the New Jersey 529 plan can receive a scholarship of up to $1,500 for attendance to an eligible New Jersey higher education institute,” Panambur said. “You will lose that benefit if roll over your account to a different state’s plan.”
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This story was originally published on April 5, 2019.
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