Annual 529 plan contribution limits
529 plans do not have annual contribution limits. however, contributions to a 529 design are considered complete gifts for federal tax purposes, and in 2022 up to $ 16,000 per donor ( $ 15,000 in 2021 ), per beneficiary qualifies for the annual endow tax exception. overindulgence contributions above $ 16,000 must be reported on IRS Form 709 and will count against the taxpayer ’ s life estate and endowment tax exemption measure ( $ 12.06 million in 2022 ) .
There is besides an option to make a larger tax-exempt 529 plan contribution, if the contribution is treated as if it were spread evenly over a 5-year period. For example, a $ 80,000 collocate summarize contribution to a 529 plan can be applied as though it were $ 16,000 per year, angstrom long as no other gifts are made to the same beneficiary over the following 5 years. Grandparents sometimes use this 5-year gift-tax average as an estate of the realm plan strategy .
Aggregate 529 plan limits
Each state sets an aggregate limit for 529 plan contributions. This specify applies to the entire contributions to 529 plans administered by a particular state for the like beneficiary over the life of the accounts. The limits are based on the price to attend an expensive 4-year college and calibrate school in that submit .
once the unite 529 plan balances for the beneficiary ’ s in-state 529 plans reach a state ’ randomness sum limit, no extra contributions can be made to any 529 plan administered by that state. The accounts will not be penalized if investment earnings push the balance over the restrict, but no extra contributions can be made unless the combined 529 design balances dismiss below the limit. For case, this could happen if the investments in the 529 plan neglect in value or the 529 plan account owner takes a distribution .
Families may be able to contribute beyond a state ’ second aggregate limit by contributing to another state ’ s 529 plan. IRS regulations do not prohibit a beneficiary from having accounts in unlike states with a combine balance that exceeds a state of matter ’ s aggregate terminus ad quem. But, any measure above the state ’ second aggregate limit must be an allow total to cover a benefactive role ’ mho future higher education needs .
States with the highest aggregate limits
|New Hampshire||$ 542,000|
|New York, Rhode Island||$ 520,000|
reservoir : Savingforcollege.com research
States with the lowest aggregate limits
|Delaware, Kentucky, South Dakota, Tennessee||$ 350,000|
|Hawaii, New Jersey||$ 305,000|
|Connecticut, Oklahoma||$ 300,000|
|North Dakota||$ 269,000|
|Georgia, Mississippi||$ 235,000|
source : Savingforcollege.com research
View the wax list of maximum contribution limits by state of matter here
Limits on 529 plan state income tax benefits
Over 30 states offer a express income tax discount or state income tax credit for 529 plan contributions. In most states, residents must contribute to an in-state 529 design to be eligible for a express income tax benefit. however, in Arizona, Arkansas, Kansas, Minnesota, Missouri, Montana and Pennsylvania, contributions to any 529 design qualify for an annual express income tax profit .
In Colorado, New Mexico, South Carolina and West Virginia, 529 design contributions are fully deductible from department of state taxable income. early states limit the amount of contributions that are eligible for a express income tax benefit. For example, in Pennsylvania, residents may deduct 529 plan contributions up to the amount of the annual endowment tax exclusion ( $ 16,000 in 2022 ) from Pennsylvania taxable income each year. In Massachusetts residents may entirely deduct up to $ 1,000 per class of 529 plan contributions from Massachusetts taxable income .
Some states allow taxpayers to carryforward excess contributions for country income tax purposes. For example, Louisiana, Ohio, Rhode Island, Virginia and Wisconsin allow carryforward of excess contributions for an inexhaustible count of years.
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so, if Ohio parents want to contribute more than their express ’ second annual terminus ad quem of $ 4,000 per beneficiary, they may deduct the excess in future years in increments of $ 4,000 per class, until the entire contribution come is deducted. Maryland allows carryforward for up to 10 years, while Arkansas, Connecticut, Oklahoma, Oregon and Washington DC allow it for 4 or 5 years .
But, other states do not allow carryforward of excess contributions for state income tax break purposes. For example, Illinois provides an annual country income tax tax write-off for joint contributions of up to $ 20,000, without carryforward of excess contributions. If a married couple were to contribute a lump union of $ 75,000 to an Illinois 529 plan using 5-year gift-tax average or to contribute $ 15,000 each to the 529 plans of two beneficiaries, they could only deduct $ 20,000 from Illinois taxable income. They would not be able to claim a country income tax deduction on the remaining contribution amount in future tax years. This provides a disincentive to making a ball sum contribution .
View a tilt of each submit ’ mho income tax benefit limits here