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How to Make a 529 Plan Gift Contribution


As grandparents and other relatives look for a way to leave a legacy and impact the next generation, younger people are facing record-high college expenses and unmanageable student debt. Fortunately, 529 plan gift contributions help solve both issues by providing a conduit for monetary giving that alleviates a major problem for students and saves money for college. It’s important to understand how to make a 529 plan gift contribution without incurring tax burdens. You may also want to work with a financial advisor who can help you create a college savings plan for your own financial situation.

What Is a 529 Plan?

A 529 plan is a tax-advantaged investment account that pays for education and related costs. College tuition, K-12 education, books, laptops and more are eligible expenses for these accounts. Paying for school with a 529 plan also helps prevent other savings accounts from disqualifying you from financial aid.

529 plans run at the state level, so account features vary by state. For example, maximum contributions to your plan depend on state regulations and range from $235,000 to over $500,000. However, you’ll encounter two primary account types when setting up your plan: college savings plans and prepaid tuition plans.

College savings plans function like Roth IRAs, except you withdraw funds for education instead of retirement. With a college savings plan, you select investment funds to create a portfolio or hire a financial advisor to set up your investments. Typically, plans offer mutual funds, stocks, bonds and FDIC-insured savings accounts.

Once you construct a portfolio, you contribute post-tax dollars to the account, which are invested accordingly. Then, when the plans’ designated beneficiary begins their education, they can withdraw money to pay for relevant expenses.

Prepaid tuition plans allow you to pay for future education with today’s prices. These plans help save money by front-loading education costs and circumventing education cost hikes down the road. However, the only qualifying expenses for these plans are tuition and required institutional fees. As a result, you might have to come up with additional cash for books, computers and other non-tuition expenses.

How to Make a 529 Plan Gift Contribution

Giving to a 529 plan is a straightforward process you can complete online or by check. If you don’t have the account information, ask the account owner (either the designated beneficiary or a relative of the beneficiary, such as a parent or guardian) for the plan information. Then, you can use the plan’s website function to send a gift electronically. States usually use Ugift as the platform for online contributions to 529 plans.

To give through the mail, you can send a check to the 529 plan with the name and account number of the designated beneficiary. The account owner and the designated beneficiary’s state should be able to provide you with the necessary account information to make a gift.

Parent-Owned 529 Plan Benefits

529 gifting

Parents who own 529 plans on behalf of their children might qualify for state income tax deductions and tax credits for contributions, depending on their state. In addition, donors can give $16,000 of contributions per donor per year without paying taxes on the gifts. This figure will increase to $17,000 for 2023.

Money in a parent-owned 529 plan also affects student aid eligibility far less. For example, a parent with a 529 plan for their child will have 5.64% of their assets count against student aid eligibility, meaning their child is more likely to receive a generous amount of help for costs the 529 plan doesn’t cover.

Lastly, parent-owned 529 plans don’t create untaxed income for their children when they withdraw money for education expenses. Up until October 1, 2022, withdrawals from grandparent-owned plans became taxable income for students, financially burdening beneficiaries paying for school. This rule appears to have changed, but parent-owned accounts have never had this issue.

Gift Tax Considerations

Gift taxes can be an issue for donors because of how expensive it can be for both sides. The last thing you want is to get stuck paying taxes on a gift, or worse have your loved one pay a bunch of tax for receiving the gift. However, the following tips can help you avoid them altogether:

Annual Gift Exclusion

As mentioned above, donors can give $16,000 annually per beneficiary without tax implications. So, keeping your contributions under the limit will help prevent gift taxes.

The annual gift exclusion is per donor per recipient. So, for example, in 2022, you could have given each of your three grandchildren $16,000, and your spouse could separately give each grandchild $16,000 as well without incurring gift taxes. For 2023, the limit is increased to $17,000. Remember, contributions of all sizes count towards your lifetime gift and tax exemption limit.

Lifetime Gift and Tax Exemption

If you surpass the $16,000/$17,000 gift limit, you can use Form 709 to report the funds and pay no gift taxes. This report contributes to your lifetime gift and estate tax exemption, which was $12.06 million in 2022 and currently $12.92 million in 2023. You are exempt from gift taxes if your lifetime gifts stay under this limit. However, if Congress does not pass another law to maintain these limits, they could drop to about $5.49 million after 2025.


If you have a substantial financial gift to make that surpasses the annual limit and your lifetime exemption, tax law allows you to superfund a 529 plan. Superfunding means breaking your contribution into five chunks that go into the account once annually. For example, if you make a superfund contribution for years 2023 through 2028, you would have five contributions of $17,000 each deposit into a 529 plan. At the end of 2028, you will have made a total contribution of $85,000.

Ways to Ask for College Savings as a Gift

529 gifts are an excellent way to grow your account. Parents and future students alike can use the following strategies to help get friends and loved ones on board:

  • Appeal Through a 529 Online Profile: Your 529 plan might have a web component where you can flesh out a personal profile. Displaying your achievements and aspirations can inspire loved ones to support you. Plus, some 529 plans have online swag shops where your supporters can accompany monetary donations with branded apparel and decorations.
  • Streamline Giving Through an Ugift Code: You can likely generate a shareable link through your 529 plan or plan’s Ugift platform. Then, spread it through email and social media, and donors can use it to navigate directly to your plan page and make a gift.
  • Include Your Appeal in Party Invitations: Summer graduation parties and birthday parties for high school seniors are ideal events to push your 529 plan. When sending invitations, include a link or code for your 529 plan and encourage partygoers to donate instead of purchasing a gift. Whether you send physical or electronic invitations, your guests will have donation information at hand.
  • Reach Out Through Social Media: Parents posting about how proud they are of their children or prospective students expressing their educational goals on social media can draw donations. Include a link to your 529 plan with a call to action to support the student’s college dreams. The wider your social media audience, the more likely you are to get engagement with your post.
  • Don’t Forget Physical Mail: When communicating about your 529 plan, including the physical mailing address for donors who prefer to send a paper check. However, supporters who contribute to your 529 plan by check will need personal information, such as account number, so it’s best not to share this with family and close friends.

Can My Child Use the 529 Plan Funds for Expenses Other Than Education? 

529 gifting

Your child can use money in their 529 plan for purposes besides qualified education expenses. However, they will pay a 10% penalty on withdrawals and pay income taxes.

Fortunately, 529 plans have the flexibility to help you use the funds without penalty. First, you can make another one of your children or yourself the designated beneficiary by rolling the funds into another 529 plan. Any member in your immediate family with intentions to further their education can benefit.

Second, The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 allows 529 plans to pay for non-college educational courses, such as trade apprenticeships. For example, costs associated with becoming an electrician or carpenter may qualify for 529 coverage.

Third, you can repay $10,000 of student loans once per beneficiary or eligible family member with a 529 plan and $10,000 of K-12 education costs each year. In addition, eligible K-12 education includes private school tuition.

The Bottom Line

Gifting contributions to a 529 plan can be a great way to give a loved one the gift of money for college and it has certain tax benefits. You can make 529 plan contributions online or by check with generous maximums going into 2023. Your annual limit is $17,000 per beneficiary per year, while you can superfund a plan with five years’ worth of donations. Donations beyond these limits will require you to fill out Form 709 when filing taxes to avoid paying gift taxes.

Tips for Contributing a Gift to a 529 Plan

  • Contributing to a 529 plan can have significant tax ramifications if you accidentally surpass your annual or lifetime limits. A financial advisor can help you optimize giving and minimize your tax burden. Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goalsget started now.
  • Gift contribution limits are changing next year, and so are 529 plans themselves. Use this guide to check the best 529 plans for 2023.

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