A 529 plan is a tax-advantaged method for folks to avoid wasting for his or her youngsters’s schooling bills. The IRS doesn’t impose a contribution restrict on 529 plans, in contrast to for different tax-advantaged accounts resembling 401(ok)s and Roth IRAs, although some limits do exist.
States usually impose their very own lifetime caps, although they’re all excessive and properly greater than what a household will seemingly want. Savers may additionally exceed the IRS reward tax exclusion, creating tax implications, although it received’t be a problem for most individuals.
Right here’s what it’s essential find out about 529 plan contribution limits.
What’s the contribution restrict for 529 plans in 2025?
One of many many advantages of 529 plans is there is no such thing as a federal restrict on the quantity you’ll be able to contribute. However whereas there’s no federal cap, many states have set their very own combination limits on the entire quantity you’ll be able to contribute to a single beneficiary’s 529 plan. These state-imposed caps vary from $235,000 to $596,925.
The IRS recommends contacting the plan’s administrator to seek out out the state program’s contribution restrict.
States with the highest 5 combination contribution limits
| State | Cap |
|---|---|
| New Hampshire | $596,925 |
| Arizona | $590,000 |
| Wisconsin | $589,650 |
| Utah | $574,000 |
| Alaska, Connecticut, Missouri, North Carolina, Vermont, Virgina, West Virginia | $550,000 |
States with the 5 lowest combination contribution limits
| State | Cap |
|---|---|
| Georgia | $235,000 |
| North Dakota | $269,000 |
| Hawaii, New Jersey | $305,000 |
| South Dakota, Tennessee | $350,000 |
| Montana | $396,000 |
Whereas plans are state-sponsored, in most conditions you don’t must be a state resident to put money into a 529 plan. It’s essential for folks to verify the principles of their particular state’s plan to make sure compliance with any limits that could be in place.
Reward tax exclusion
Once you contribute cash to a 529 plan, it’s thought of a present by the IRS. If the contribution is beneath a sure restrict every year, you received’t must notify the IRS of it. In 2025, you’ll be able to contribute as much as $19,000 per beneficiary per yr earlier than it’s essential file IRS Kind 709.
Since every donor can contribute as much as $19,000 per beneficiary, a married couple can contribute as much as $38,000 in a single yr per youngster without having to file Kind 709. If in case you have two youngsters, every father or mother can add $19,000 to every of their accounts and nonetheless adjust to IRS guidelines.
Even if you happen to exceed the restrict in a yr, you don’t essentially pay taxes on it. As an alternative, the surplus quantity merely counts towards your lifetime property tax exclusion. You’d have to offer $13.99 million (as of 2025) over your lifetime to set off taxes, so most individuals received’t come anyplace near the lifetime cap, although Congress could elevate or decrease it.
Moreover, the IRS supplies an possibility for “superfunding” a 529 plan, which helps you to contribute as much as 5 occasions the annual exclusion quantity in a single yr — as long as you don’t make any further contributions to the identical beneficiary over the following 5 years. This avoids reward tax on $95,000 in 2025 by treating it as if it was contributed over a five-year interval.
Different contribution and tax concerns for 529 plans
The 529 plan has develop into a well-liked option to save for faculty bills — and for good cause. It gives a bunch of tax-advantaged advantages.
First, contributions to the account develop tax-deferred, and withdrawals are tax-free when used for certified schooling bills resembling tuition, charges, room and board, and books at certified instructional establishments. Initially designed for faculty bills, 529 plans can now be used for Ok-12 tuition at personal faculties and apprenticeship applications.
Funding a 529 plan could have fast tax advantages in some instances. Over 35 states provide tax deductions on contributions, although normally solely as much as a specific amount. Whereas contributions are made with after-tax cash and don’t qualify for a federal tax deduction, the potential for a tax break on the state stage might be useful.
Nearly anybody can open a 529 plan. Mother and father, grandparents and different kinfolk can set up and contribute to the account. Moreover, people can open a plan to fund their very own instructional bills.
Every state plan has completely different advantages, and it may well pay to go searching and discover the very best plan for your loved ones. You’ll need to search for low price, stable funding returns and good advantages.
Lastly, beginning in 2024, households can roll unused 529 plan funds to a Roth IRA within the beneficiary’s identify with out triggering earnings taxes or penalties.This new rule, signed into legislation as a part of 2022’s SECURE Act 2.0, gives flexibility to households in case a toddler decides to not go to varsity or unused funds stay within the account after commencement.
Key guidelines apply to the conversion: The 529 plan have to be open for at the least 15 years earlier than it may be rolled over right into a Roth IRA and there’s a $35,000 lifetime restrict on rollovers.
Backside line
A 529 faculty financial savings plan gives a versatile and tax-advantaged method for folks to avoid wasting for his or her youngsters’s schooling. Whereas there is no such thing as a federal contribution restrict, try to be conscious of state-specific caps and navigate potential reward tax concerns. By staying knowledgeable, you’ll be able to construct a stable basis on your youngsters’s instructional future.
