The short answer: Not without paying taxes. But as with much of the tax code, there are various nuisances and exemptions to expound. The IRS considers moving money from your IRA to a 529 plan as a distribution included in your taxable ordinary income. Beyond the ordinary income tax, you would also face an additional 10% tax penalty for the early withdrawal if you are not yet 59.5 years old. After those taxes, you could contribute what’s left to the 529 plan.
Rather than opening the 529, you might consider using the IRA distribution for the education expense, as distributions from your IRA for the purposes of higher education are exempt from the 10% penalty. According to the IRS, penalty exempt expenses include “tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution.” You should visit the IRS website to get a full breakdown of the exempt expenditures. Remember, the higher education expense would exempt you from the 10% penalty, but the distribution would still incur the ordinary income tax. In addition, the distribution may need to be included as income on any financial aid applications.
Finally, you might consider opening a 529 plan and beginning to contribute from your regular income rather than your qualified plan. This way, you can avoid both the ordinary income and early withdrawal tax from your IRA and begin to grow the 529 plan. In addition, many states’ 529 plans allow the account owner to make a full or partial state income tax deduction for contributions to the plan. If you’re not sure of the best strategy for your particular state and situation, you should reach out to a financial advisor for guidance.