Unlike with 401(k) plans and other retirement savings vehicles, the IRS does not set annual contribution limits for 529 college savings plans. Instead, the states that sponsor individual 529 plans set parameters for the life of the plan. So what are the 529 plan contribution limits for plans you’re considering? And how can you be sure to follow the rules so as not to incur any penalties? Read on to find out.
529 Plan Contribution Limits by State
State contribution limits range from around $200,000 on the low end to more than $500,000 on the high end per beneficiary.
And although 529 plan contribution limits are typically high across each state, the limits apply to every type of 529 plan account you open per beneficiary. So let’s say you open a direct-sold 529 plan and an advisor-sold 529 plan sponsored by New York for your child. The contribution limits in New York are set at $520,000. This means your combined contributions toward both plans can’t exceed that amount for one beneficiary. This maximum applies to the total contributions you make the entire time you invest in 529 plans. It’s not an annual contribution limit, like the kind you’d see with retirement plans.
However, your balance can still grow past that amount through investment returns without limit.
The table below illustrates the current 529 plan contribution maximums by state.
| 529 Plan 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 |
| 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 tax-deductible contributions or receive tax credits up to certain limits. Some even allow you to make tax-deductible contributions up to their 529 plan contribution limits.
Seven states allow tax-deductible contributions into 529 plans sponsored by any state. They are Arizona, Arkansas, Kansas, Minnesota, Missouri, Montana and Pennsylvania.
Some states, however, don’t allow tax-deductible contributions even though they levy state income tax. They are California, Delaware, Hawaii, Kentucky, Maine, New Jersey, and North Carolina.
Still, 30 states and the District 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 as gifts for tax purposes. As of 2018, however, individuals can gift up to $15,000 a year to any other individual without needing to report the funds to the IRS for purposes of a gift tax.
But what about those massive 529 plan contribution limits? Well, 529 plans offer a little bit of wiggle room. Individuals can put up to $75,000 into a 529 plan at once or over a short period while still having that money excluded from the gift tax. Married couples filing jointly can do the same for up to $150,000. However, they’d need to put a hold on making further contributions for five years.
You can make contributions between $15,000 and $75,000, and those funds will be prorated through five years. So you can transfer $50,000 in one year and the IRS will treat it as $10,000 contributed per year over five years. Therefore, you can make additional transfers of up to $5,000 each of those years and still avoid gift tax.
529 Contribution Limits And Lifetime Gift Exemption
So what if you contribute more than $75,000 over five 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 turn, those total will be calculated as part of your lifetime exclusion ($11.2 million per person in 2018).
If you do happen to give more than that limit, you could incur a gift tax of 40% for the excess amount.
The Takeaway
States set large contribution limits for 529 college savings plans. And any U.S. citizen can open an account with a 529 plan sponsored by any state. But limits peak high across the country. So 529 contribution limits shouldn’t be the deciding factor when shopping around for a 529 plan to fund your child’s educational future.
Tips on Making the Most Out of 529 Contribution Limits
- Don’t focus too much on the contribution limits when shopping around for 529 plans. Each state sets them fairly high. Plus, you’re not likely to need to breach the limit to fund necessary qualified expenses.
- 529 plans allow you to contribute up to $75,000 into a 529 plan without triggering a gift tax. But there are rules you must follow. Consult a financial advisor to make the most out of this benefit. If you’ve never worked with one before, you can use our SmartAdvisor matching tool to get paired up with one. After answering a few simple questions, it links you to financial advisors in your area based on your unique financial needs. You can then review their qualifications and set up interviews.
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