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529 contribution limits for 2023

Key takeaways

  • Individual states sponsor 529 plans and have varying total account maximums determined by a given state.
  • In 2023, individuals can gift up to $17,000 in a single 529 plan without those funds counting against the lifetime gift tax exemption amount.
  • “Superfunding” a 529 plan allows up to 5 years’ worth of contributions in a single year.
  • Research state tax exemptions, fees, and returns to determine the best 529 plan for your family.

Saving for your kid’s college costs can seem daunting, but 529 plans could be a fairly simple way to prepare for those bills. These tax-advantaged accounts have high contribution limits that allow you to stash away savings for higher education. Here’s a look at 529 contribution limits for 2023, plus ways you could maximize your contributions.

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529 contribution limits

Because each state sponsors its own 529 plan, they have their own rules about 529 contribution limits. Still, they all follow federal law: the earnings portion of any withdrawal not used for qualified higher education expenses (QHEEs) in a 529 is taxable and may be subject to a penalty. Beyond tuition, qualified expenses include books, classroom supplies, fees, electronics such as a computer, and reasonable room and board charges.1 As anyone familiar with US college costs can tell you, QHEEs can add up to a possibly large sum. For the 2022 to 2023 school year alone, the average published tuition, fees, and room and board at a 4-year public school for out-of-state students is $40,550, while a private nonprofit 4-year school costs $53.440.2

Most states have 529 plans, so you can choose from a whole bunch. You don’t have to pick the plan your home state sponsors or even a plan in the state where your child goes to college. But many states offer incentives for residents to use their plans, including state income tax benefits, which may only apply up to certain 529 contribution limits.3

529 gift tax contribution limits

When you think of 529 contribution limits, you might actually be thinking of the annual gift tax exclusion. That’s because the IRS counts contributions to 529 plans as gifts. In 2023, you can gift up to $17,000 (or if you’re married and file taxes jointly, up to $34,000) per recipient without those contributions counting toward your lifetime gift tax exemption.4 So if you have three kids and three 529 plans, and you’re a single parent, you can contribute $17,000 each, or $51,000 total, in a year without having to report those contributions to the IRS. Any contributions above the $17,000 (or $34,000 if you’re married) per year per recipient must get reported to the IRS and will count toward your lifetime gift tax exemption of $12.92 million (or $25.84 million for married couples) in 2023. Go above that total amount in gifts, and you’ll be subject to a gift tax.5

If you want to contribute more to a 529 account in a single year without counting against your lifetime gift tax exemption, the account can be “superfunded.” You can fund a 529 plan with up to 5 years’ worth of contributions all at once. That means an individual can contribute up to $85,000 in a single year to a particular 529 plan.6 But you couldn’t give more money to that same recipient within that 5-year period without counting against your lifetime gift tax exemption.

How much should you contribute to a 529?

Deciding how much to contribute to a 529 plan depends on a number of factors, including your distribution time frame. How many years do you have until you’ll use the funds from the 529 plan? Will you need to take out funds for private elementary or high school education, or will everything sit until college?

Another major factor: your own financial situation. Strategizing your 529 plan contributions is smart for helping to afford your child’s future education, but first you have to be stable yourself, and funding your retirement. So make sure your financial house is in order—as in, you can afford your bills and also put away plenty for retirement—before contributing to a 529 plan.

How to maximize your 529 contributions

Now that you know the fine print behind 529 contributions, here are some ideas to help those contributions potentially go further.

  • Research 529 plans from various states to find the right fit for your family. Your home state may offer income tax incentives or other benefits that might make its 529 plan a good option. Weigh the pros and cons of each plan to help determine the best pick for you.
  • Remember that 529 plans aren’t just for college anymore. The federal government allows distributions to pay for tuition, up to $10,000 per year, at elementary or secondary public, private, or religious schools.7 If your child has a tuition payment before college, consider utilizing tax-free 529 distributions to pay those bills.
  • If superfunding is financially possible for you, it can help generate more money for the 529 plan’s beneficiary. A larger lump sum contribution may potentially generate more earnings compared to the same size contribution spread out over months or years because it has a longer time horizon.
  • If grandparents are contributing to a 529 plan, contributing a larger “superfunded” amount can work as an estate-planning strategy. The contribution removes the large sum from the grandparents’ taxable estate.
  • Keep in mind that anyone can contribute to a 529 plan, not just the account owner.

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Please carefully consider the plan's investment objectives, risks, charges, and expenses before investing. For this and other information on any 529 college savings plan managed by Fidelity, contact Fidelity for a free Fact Kit, or view one online. Read it carefully before you invest or send money.

1. “Transition Relief for Certain Section 529 Qualified Tuition Programs Required to File Form 1099-Q, Payments From Qualified Education Programs (Under Sections 529 and 530),” IRS, as of June 6, 2023. 2. “Trends in College Pricing: Highlights,” College Board, 2022. 3. Some states offer favorable tax treatment or other benefits to their residents only if they invest in their own state's 529 plan. Your or the beneficiary's home state 529 plan may offer additional state tax advantages or other state benefits such as financial aid, scholarship funds, and protection from creditors. 4. “Frequently Asked Questions on Gift Taxes,” IRS, October 27, 2022. 5. “2023 instructions for forms 1099-QA and 5498-QA”, Internal Revenue Service: Department of the Treasury, November 4, 2022. 6. An accelerated transfer to a 529 plan (for a given beneficiary) of $85,000 (or $170,000 combined for spouses who gift split) will not result in federal transfer tax or use of any portion of the applicable federal transfer tax exemption and/or credit amounts if no further annual exclusion gifts and/or generation-skipping transfers to the same beneficiary are made over the five-year period and if the transfer is reported as a series of five equal annual transfers on Form 709, *United States Gift (and Generation-Skipping Transfer) Tax Return*. If the donor dies within the five-year period, a portion of the transferred amount will be included in the donor's estate for estate tax purposes. 7. “Topic No. 313, Qualified Tuition Programs (QTPs),“ IRS, April 4, 2023.

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