How much can you contribute to a 529 plan in 2022?

Annual 529 contribution limits

In 2022, many families are trying to make the most of their tax-advantaged savings accounts. Those saving for retirement may deposit up to $ 6,000 to an IRA or Roth IRA ( $ 7,000 if you ’ re over long time 50 ) and up to $ 19,500 to an employer-sponsored 401 ( kelvin ). But what about college funds ? That ’ s where it can get catchy, since the IRS doesn ’ t specify annual 529 contribution limits and many 529 plans offer high gear full contribution limits .
Most families won ’ t have to worry about hitting their 529 plan ’ second contribution specify this year. however, there are some rules to be aware of if you ’ re considering making a large lodge .
Wondering how your 529 plan may impact fiscal care ? Use our Financial Aid Calculator to estimate the expected family contribution ( EFC ) and your fiscal motivation.

Annual gift tax exclusion

One of the many benefits of saving for a child ’ s future college education with a 529 plan is that contributions are considered gifts for tax purposes. In 2022, gifts totaling up to $ 16,000 per individual will qualify for the annual endow tax ejection, up from $ 15,000 in 2018-2021. This means if you and your spouse have three grandchildren ( or children ) you can jointly give $ 96,000 without gift-tax consequences, since each child can receive $ 16,000 in gifts from you and $ 16,000 in gifts from your spouse. Remember, the annual giving tax excommunication total besides includes non-529 gifts then be sure to include any cash or property gifts in your entire .
If your sum gifts to an individual will be more than $ 16,000 this year, the excess total will count against your life estate and endow tax exemption and will have to be reported on Form 709 when you file your taxes. In 2022 individuals can gift up to $ 12.06 million without having to pay federal estate or endow tax. There is no joint gift-tax return, so you and your spouse will each have to file individually .

The 5-year election

Individuals may contribute adenine much as $ 80,000 to a 529 design in 2021 if they treat the contribution as if it were spread over a 5-year period. The 5-year election must be reported on Form 709 for each of the five years. For case, a $ 50,000 529 plan down payment in 2022 can be applied as $ 10,000 per class, leaving $ 6,000 in idle annual excommunication per year .
This is much called 5-year giving tax average or superfunding .
This is often a bang-up estate-tax planning strategy for parents and grandparents. They ’ re able to shelter a big amount of assets from estate of the realm taxes, while retaining manipulate of the funds in the 529 account. however, if you do end up changing your mind down the road and revoking the funds in the account they will be added rear to your taxable estate of the realm.

Lifetime gift tax exemption amount

Does this mean if you contribute more than $ 16,000 in one year or $ 80,000 over five years you ’ ll have to pay give tax ? not necessarily. As mentioned above, any gifts above the annual ejection amounts will have to be reported on the federal tax Form 709, and these will be counted against the $ 12.06 million life give tax exception. Any amounts that exceed the exception could trigger gift taxes of up to 40 %, but individuals within the $ 12.06 million limit will not be subjugate to gift taxes .

529 plan aggregate limits

Unlike IRAs or 401 ( potassium ) south, there are no annual contribution limits for 529 plans. however, there are maximal aggregate limits, which vary by plan. Under federal jurisprudence, contributions to a 529 plan can not exceed the expected cost of the benefactive role ’ sulfur qualified higher education expenses. Limits change by express, ranging from $ 235,000 to $ 550,000. This amount represents what the country believes to be the entire monetary value of attending an expensive school and alumnus school, including textbooks and room and board. If your plan counterweight is close to the terminus ad quem don ’ t worry about future earnings in the explanation pushing it over. The funds can remain in the bill without penalty, but the family will not be able to make any future contributions unless a market dribble brings the bill remainder back down .

529 plan state income tax benefits

Over 30 states, including the District of Columbia, presently offer a state income tax recognition or subtraction up to a certain measure. For case, contributions to a New York 529 plan of up to $ 5,000 per year by an individual or $ 10,000 per year by a married copulate filing jointly are deductible in computing department of state income tax. But that doesn ’ thyroxine mean New York parents are limited to contributing $ 10,000 to their 529 plan. If the couple chooses to take advantage of the annual giving tax ejection and deposits $ 16,000 this year, the entire amount will grow federal tax-exempt, but entirely the first base $ 10,000 may be deducted from their state of matter taxable income .

Next Steps

A good place to start:

See the best 529 plans, personalized for you


Upromise allows you to earn cash back to your 529 plan by shopping through their on-line portal, dining out, or signing up for their cash back credit card. CollegeBacker has a shopping portal vein and a give page for family and friends to contribute to your college fund .
At, our finish is to help you make chic decisions about saving and paying for education. Some of the products featured in this article are from our partners, but this doesn ’ t determine our evaluations. Our opinions are our own .

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Category : Finance

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