Many 529 plans reported double-digit increases in gift contributions during the 2018 holiday season. This could be a sign that grandparents and other loved ones are becoming more comfortable with giving the gift of college. Parents may also be taking advantage of online tools and registries offered by 529 plans that make asking for gifts and receiving gifts easier.

A gift of college savings is more meaningful and lasting as a baby shower, birthday or holiday gift than a toy or game. 529 plan contributions grow tax-deferred over time and are not taxed when the funds are used to pay for qualified college expenses and up to $10,000 per year in K-12 tuition. If the child uses the funds for something other than qualified education expenses only the earnings portion of the withdrawal will be subject to income tax and a 10% penalty.

There are also potential tax benefits for the gift giver. In some states, anyone who contributes to a 529 plan qualifies for a full or partial state income tax deduction. Gift givers can avoid paying gift taxes on 529 plan contributions if annual contributions are less than the $15,000 annual exclusion amount or they elect to treat gifts between $15,000 and $75,000 as if they were spread evenly over a 5-year period.

Consumers are getting more comfortable with 529 plan gifting

According to a survey from the College Savings Foundation (CSF), 61% of parents said they would ask friends and family to consider giving a gift of college savings instead of a material gift for birthdays and holidays. New 529 plan registries and online tools available make it easier for parents to make their wishes known and receive electronic gifts.

A number of 529 plans reported increased gift contributions in 2018:

529 plans make it easy to give and receive gift contributions

In recent years, 529 plans have made significant improvements to their 529 plan e-gifting programs. With e-gifting, gift givers don’t have to go through the hassle of asking the child’s parent for the 529 plan account number and mailing in a check. And customized portals and invitations help parents feel more comfortable about asking for the gift of college savings.

Fidelity’s College Gifting Program allows parents to set up a personalized dashboard with an option to share the page via email or social media. The dashboard will show a running list of gifts received, including the amount of the gifts and the name of the person who gave the gift.

With Ascensus’s Ugift Program, friends and family can give a 529 plan gift at any time by check or electronic deposit, with the option to print a gift certificate. 529 plan account owners can share their Ugift code via email or social media, or a send a printed invitation customizable on the Ugift website.

Gift of College gift cards are now available to purchase online or at over 3,000 retail locations. Gift cards can be redeemed through a child’s Gift of College profile that is connected to an existing 529 plan or student loan account. It’s free to create an account, but gift givers are charged a 5% processing/service fee per transaction with a maximum charge of $15.