How Much Money Can You Put Into a 529 Plan Per Year
Different with 401(grand) plans and other retirement savings vehicles, the IRS does not set up annual contribution limits for 529 college savings plans. Instead, the states that sponsor individual 529 plans set parameters for the life of the programme. So what are the 529 plan contribution limits for plans y'all're considering? And how tin can you be sure to follow the rules so as not to incur any penalties? Read on to find out.
529 Plan Contribution Limits past State
Land contribution limits range from effectually $200,000 on the low end to more $500,000 on the high cease per beneficiary.
And although 529 plan contribution limits are typically high across each state, the limits apply to every type of 529 program account you open up per beneficiary. And then permit's say you open a straight-sold 529 plan and an advisor-sold 529 plan sponsored past New York for your child. The contribution limits in New York are set up at $520,000. This means your combined contributions toward both plans can't exceed that corporeality for one casher. This maximum applies to the total contributions you make the entire time you invest in 529 plans. It'southward not an annual contribution limit, like the kind y'all'd come across with retirement plans.
Nevertheless, your balance tin can still grow past that amount through investment returns without limit.
The tabular array beneath illustrates the current 529 plan contribution maximums past state.
| 529 Program Contribution Maximums by State | |
| State | Maximum |
| Alabama | $400,000 |
| Alaska | $475,000 |
| Arizona | $431,000 |
| Arkansas | $366,000 |
| California | $475,000 |
| Colorado | $400,000 |
| Connecticut | $300,000 |
| Delaware | $350,000 |
| District of Columbia | $500,000 |
| Florida | $418,000 |
| Georgia | $235,000 |
| Hawaii | $305,000 |
| Idaho | $350,000 |
| Illinois | $400,000 |
| Indiana | $450,000 |
| Iowa | $420,000 |
| Kansas | $402,000 |
| Kentucky | $350,000 |
| Louisiana | $500,000 |
| Maine | $475,000 |
| Maryland | $350,000 |
| Massachusetts | $375,000 |
| Michigan | $500,000 |
| Minnesota | $425,000 |
| Mississippi | $235,000 |
| Missouri | $325,000 |
| Montana | $396,000 |
| Nebraska | $400,000 |
| Nevada | $370,000 |
| New Hampshire | $500,000 |
| New Jersey | $305,000 |
| New Mexico | $500,000 |
| New York | $520,000 |
| North Carolina | $450,000 |
| Ohio | $462,000 |
| Oklahoma | $300,000 |
| Oregon | $310,000 |
| Pennsylvania | $511,758 |
| Rhode Island | $395,000 |
| Due south Carolina | $500,000 |
| South Dakota | $350,000 |
| Tennessee | $350,000 |
| Texas | $370,000 |
| Utah | $446,000 |
| Vermont | $352,800 |
| Virginia | $500,000 |
| Washington | $500,000 |
| West Virginia | $265,620 |
| Wisconsin | $472,000 |
| Wyoming | $472,000 |
Tax Benefits by State
Some states that sponsor 529 plans let you make revenue enhancement-deductible contributions or receive taxation credits up to sure limits. Some fifty-fifty allow you to brand tax-deductible contributions upwards to their 529 plan contribution limits.
Seven states allow tax-deductible contributions into 529 plans sponsored by any country. They are Arizona, Arkansas, Kansas, Minnesota, Missouri, Montana and Pennsylvania.
Some states, however, don't allow revenue enhancement-deductible contributions even though they levy state income tax. They are California, Delaware, Hawaii, Kentucky, Maine, New Bailiwick of jersey, and North Carolina.
Still, xxx states and the Commune of Columbia allow some kind of tax deduction.
529 Plans and the Annual Gift Tax Exclusion
The IRS treats contributions toward 529 college savings plans equally gifts for taxation purposes. As of 2018, however, individuals can gift upward to $15,000 a year to any other private without needing to report the funds to the IRS for purposes of a gift taxation.
Merely what near those massive 529 program contribution limits? Well, 529 plans offer a piddling flake of jerk room. Individuals can put up to $75,000 into a 529 plan at once or over a short period while yet having that money excluded from the gift tax. Married couples filing jointly can practise the aforementioned for upward to $150,000. However, they'd need to put a hold on making further contributions for five years.
You lot can make contributions betwixt $15,000 and $75,000, and those funds will exist prorated through 5 years. So yous tin transfer $50,000 in one twelvemonth and the IRS will treat it as $10,000 contributed per twelvemonth over v years. Therefore, you can make boosted transfers of up to $5,000 each of those years and nevertheless avoid gift taxation.
529 Contribution Limits And Lifetime Gift Exemption
And so what if yous contribute more than $75,000 over v years? That doesn't necessarily mean you'll be hit with a gift tax. You'll simply have to report any gifts above the annual exclusion amounts on your federal tax Form 709. In plough, those total will be calculated equally role of your lifetime exclusion ($11.2 million per person in 2018).
If you do happen to requite more than that limit, you could incur a gift tax of 40% for the backlog amount.
The Takeaway
States set large contribution limits for 529 college savings plans. And whatsoever U.Southward. denizen tin can open up an account with a 529 program sponsored past any state. But limits peak high across the country. So 529 contribution limits shouldn't exist the deciding factor when shopping around for a 529 plan to fund your child's educational futurity.
Tips on Making the Most Out of 529 Contribution Limits
- Don't focus also much on the contribution limits when shopping effectually for 529 plans. Each state sets them adequately loftier. Plus, you're not likely to demand to breach the limit to fund necessary qualified expenses.
- 529 plans allow you lot to contribute up to $75,000 into a 529 programme without triggering a souvenir tax. But there are rules you must follow. Consult a financial advisor to make the about out of this benefit. If you lot've never worked with ane earlier, y'all can apply our SmartAdvisor matching tool to get paired upward with 1. After answering a few simple questions, it links you to financial advisors in your surface area based on your unique financial needs. You lot tin then review their qualifications and set up interviews.
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Source: https://smartasset.com/investing/529-plan-contribution-limits
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