Some college savers mistakenly believe that there is a 529 plan annual contribution limit. 529 plans are, however, affected by gift tax considerations. There are also aggregate contribution limits.
There are no annual contribution limits on how much you can contribute to a 529 plan.
However, contributions to a 529 plan count as gifts for gift-tax purposes. Contributions beyond the annual gift tax exclusion may be subject to gift taxes. In 2022, individuals can contribute up to $16,000 per beneficiary ($32,000 for gifts from a married couple) without using up part of their lifetime gift tax exemption or having to pay gift taxes.
529 plans also have a special 5-year gift tax averaging rule, which lets an individual make a lump sum contribution of up to five times the annual gift tax exclusion per beneficiary and have it treated as though it were given over a five-year period. This allows an individual to give up to $80,000 ($160,000 for gifts from a married couple) tax-free in a lump sum.
529 plans do have an aggregate limit that ranges from $235,000 top $550,000, depending on the state. However, this is not a 529 plan annual contribution limit. Once the 529 plan’s account balance exceeds this limit, no more contributions may be made to the 529 plan, but earnings may continue to accumulate. But, one can work around this limit by opening a 529 plan in another state.
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