Written By Caitlin See
As tuition and education expenses continue to rise, many Americans are planning ahead by saving for college.
According to the College Savings Plans Network, there are over 14.56 million 529 college savings accounts nationwide, with a collective $373.5 billion in assets as of June 2020. And the average account balance is $25,657.
If you’ve chosen to invest in a 529 college savings plan, you might be able to take advantage of special federal and state tax benefits. But you’ll also need to plan for certain restrictions, like 529 contribution limits and federal gift tax exclusions.
Here’s what you need to know about the tax advantages and contribution limits for a 529 plan in every state.
Federal 529 max contribution
A 529 plan is a great investment tool that can help your money grow tax-free. Contributions aren’t deductible at the federal level. But, when used for qualified education expenses, funds can be withdrawn tax-free and without penalty.
With such great benefits, you may be wondering, “How much can I contribute to a 529 plan?”
The federal government doesn’t limit how much you can contribute annually or over the life of your 529 plan.
Instead, it leaves it up to each state’s 529 plan to determine contribution limits based on general guidance that contributions “can’t be more than the amount necessary to provide for the qualified higher education expenses of the beneficiary”.
Get Started With Our New IDR Calculator
529 contribution limits for 2021 by state
Each state’s plan has different 529 contribution limits and tax benefits for its residents.
State plans don’t have an annual contribution limit. Rather, there’s an aggregate contribution limit based on education costs specific to the state that currently range from about $235,000 to $530,000.
Depending on where you live, you might be able to take advantage of state tax deductions or credits that can lower your tax burden.
Here’s an overview of each state’s maximum contribution limit and available tax deduction or credit. Keep in mind that some states don’t impose a state income tax. Therefore, plan contributors won’t receive any additional tax savings.
State | Maximum Contribution Limit (Per Beneficiary) | State Tax Benefit |
$475,000 | Up to $5,000 for individuals ($10,000 for married, filing jointly) | |
$475,000 | No state income tax | |
$505,000 | Up to $2,000 for individuals ($4,000 for married, filing jointly) | |
$366,000 | Up to $5,000 for individuals ($10,000 for married couples) | |
$529,000 | No tax benefit offered | |
$400,000 | 100% of contributions are deductible | |
$300,000 | Up to $5,000 for individuals ($10,000 for married, filing jointly) | |
$350,000 | No tax deduction offered | |
$418,000 | No state income tax | |
$235,000 | Up to $4,000 per beneficiary for individuals ($8,000 for married, filing jointly) | |
$305,000 | No tax deduction offered | |
$500,000 | Up to $6,000 for individuals ($12,000 for married, filing jointly) | |
$450,000 | Up to $10,000 for individuals ($20,000 for married, filing jointly) | |
$450,000 | 20% of contributions (up to $1,000 tax credit) | |
$420,000 | Up to $3,474 per beneficiary for individuals for 2021 ($6,948 for married, filing jointly). Deduction is adjusted annually for inflation. | |
$435,000 | Up to $3,000 per beneficiary for individuals ($6,000 for married, filing jointly) | |
$350,000 | No tax benefit offered | |
$500,000 | Up to $2,400 per beneficiary for individuals ($4,800 for married, filing jointly). Any unused portion of deduction may be carried over to future tax years. | |
$500,000 | No tax deduction offered | |
$500,000 | Up to $2,500 per beneficiary for individuals ($5,000 for married, filing jointly). Excess contributions can be carried forward to future tax years. | |
$400,000 | Up to $1,000 for individuals ($2,000 for married, filing jointly) | |
$500,000 | Up to $5,000 for individuals ($10,000 for married, filing jointly) | |
$425,000 | Up to $1,500 for individuals ($3,000 for married, filing jointly). Or claim a tax credit for 50% of contributions (up to $500). | |
$235,000 | Up to $10,000 for individuals ($20,000 for married, filing jointly) | |
$325,000 | Up to $8,000 for individuals ($16,000 for married, filing jointly) | |
$396,000 | Up to $3,000 for individuals ($6,000 for married, filing jointly). Must be an account owner (or a spouse or parent of the account owner). | |
$500,000 | Up to $10,000 for individuals and married filing jointly (splits to $5,000 for married, filing separately). Must be an account owner. | |
$500,000 | No state income tax | |
$542,000 | No tax deduction offered | |
$305,000 | No tax deduction offered | |
$500,000 | 100% of contributions are deductible | |
$520,000 | Up to $5,000 for individuals ($10,000 for married, filing jointly) | |
$500,000 | No tax benefit offer | |
$269,000 | Up to $5,000 for individuals ($10,000 for married, filing jointly) | |
$462,000 | Up to $4,000 per beneficiary for individuals and married couples. Excess contributions can be carried forward to future tax years. | |
$300,000 | Up to $10,000 per beneficiary for individuals ($20,000 for married filing, jointly) | |
$400,000 | Up to $150 tax credit available for individuals ($300 for married, filing jointly) | |
$511,758 | Up to $15,000 per beneficiary for individuals ($30,000 for married, filing jointly) | |
$500,000 | Up to $500 for individuals ($1,000 for married, filing jointly). Must be the account owner. | |
$520,000 | 100% of contributions are deductible | |
$350,000 | No state income tax | |
$350,000 | No tax deduction offered for 2020. No state income tax as of 2021. | |
$500,000 | No state income tax | |
$500,000 | 5% tax credit for the first $2,040 per beneficiary ($4,080 for married, filing jointly). Must be the account owner. | |
$352,800 | 10% of the first $2,500 per beneficiary ($5,000 for married, filing jointly) | |
$500,000 | Up to $4,000 per beneficiary. Excess contributions can be carried forward to future tax years. | |
$500,000 | No state income tax | |
$400,000 | 100% of contributions are deductible | |
$516,000 | Up to $3,380 per beneficiary for individuals and married couples (splits to $1,670 for married, filing separately and divorced parents). Deduction is adjusted annually for inflation. Excess contributions can be carried forward to future tax years. | |
Wyoming (no longer available) | N/A | No state income tax |
Note that the maximum contribution limit for each state applies to all accounts opened for a beneficiary.
For example, let’s say Tori’s parents opened a 529 plan in Connecticut when she was an infant. But later, her grandparents decided to open a separate account for her. Since Tori is named as the beneficiary for each account, the maximum account balance for all accounts can only add up to $300,000.
Considerations for 529 contributions
The Internal Revenue Service (IRS) considers any direct or indirect transfer of money to another individual as a taxable gift. This means your 529 plan contributions will be treated as a gift and might be taxed.
But you can claim an annual federal gift tax exclusion to shelter some of your contributions. For 2020 and 2021, the annual gift tax exclusion is $15,000 per beneficiary. If you’re married, both you and your spouse can claim the annual exclusion (totaling up to $30,000) by filing a gift tax return separately.
So, if you have multiple children with 529 plans, you can claim exclusions for each one.
Additionally, if you choose to make a large contribution that exceeds $15,000 for any one person, you can opt to treat up to $75,000 of the contribution as if you made it over a five-year period.
Keep in mind that this content is for informational purposes and isn’t meant to be tax advice. We recommend consulting a tax professional to ensure you understand any federal and state tax implications for your 529 plan contributions.
Keep reading: Can I Use a 529 Plan to Pay for My Student Loans?
| Lender Name | Lender | Offer | Learn more |
|---|---|---|---|
| Sallie Mae |
|
Competitive interest rates.
|
Fixed 4.50 - 15.69%
Variable 6.37 - 16.78%
|
| Earnest |
|
Check eligibility in two minutes.
|
Fixed 4.67 - 16.15%
Variable 5.87 - 18.51%
|
| Ascent |
|
Large autopay discounts.
|
Fixed 4.09 - 14.89%
Variable 6.22 - 15.20%
|
| College Ave |
|
Flexible repayment options.
|
Fixed 4.07 - 15.48%
Variable 5.59 - 16.69%
|
