A gift of college savings is a meaningful alternative to traditional birthday, holiday, baby shower and graduation gifts. But, according to a recent survey from the College Savings Foundation, only 20% of parents ask loved ones contribute to their child’s 529 plan instead of giving a material gift. Many 529 plans are making gifting easier by offering gifting platforms that accept online contributions and can be shared with friends and family. 

Benefits of gift giving through a 529 plan

A 529 plan gift will grow tax-free over time, and distributions will not be taxed as long as the funds are used to pay for qualified higher education expenses. If the beneficiary decides to use the funds for something other than college, only the earnings portion of the distribution will incur income tax and a 10% penalty.

Gift givers may also qualify for a state income tax deduction or credit for 529 plan contributions. Most states allow anyone who contributes to a 529 plan to claim the state income tax deduction or credit, while some only offer this benefit to the 529 plan account owner.

How to give a gift through a 529 plan

A gift giver can open a new 529 plan account in a child’s name or contribute to an existing account. Contributions to a custodial 529 plan account or to a parent-owned 529 plan will minimize the impact on eligibility for need-based financial aid. 

Gift contributions can be sent by check to almost any 529 plan. Just make the check payable to the 529 plan and write the beneficiary’s name and account number on the check. But, the 529 plans listed below make it easier to give the gift of college with online contribution and other crowdfunding tools. You can also contribute to a 529 plan with Gift of College gift cards, which are available to purchase online or at over 3,000 retailers including Target and Barnes & Noble. Ask the child’s parent about the best way to contribute.

How to avoid gift taxes on 529 plan gifts

Most people can make fairly large contributions to a child’s 529 plan without incurring gift taxes. Gifts of up to $15,000 per beneficiary will qualify for the annual gift tax exclusion. Friends and family who want to make a larger tax-free gift can use 5-year gift tax averaging. Gifts up to $75,000 can be treated as if they were spread evenly over a 5-year period. The gift tax exclusion limit is per gift giver, so couples can gift up to $30,000 per year per child, or $150,000 if using 5-year gift tax averaging. 

529 plans that offer e-gifting platforms

529 Savings Plans

Gifting Program

E-Gifting

Gift Cards or Certificates

Customizable Invitations

Gifting Portal

CollegeCounts 529 Fund Direct- and Advisor-Sold (Alabama)

GiftEd

Yes

Yes

 

 

T. Rowe Price College Savings Plan (Alaska)

GoTuition

Yes

Yes

Yes

Yes

University of Alaska College Savings Plan

GoTuition

Yes

Yes

Yes

Yes

Fidelity Arizona College Savings Plan

Fidelity College Gifting Program

Yes

 

 

Yes

Arizona Family College Savings Program – Bank Plan

College Savings Bank, a Division of NexBank, Gifting Program

Yes

Yes

 

 

Arkansas 529 Plans, Direct- and Advisor-Sold

Ugift

Yes

Yes

Yes

 

Scholarshare 529 (California)

 

Yes

Yes

Yes

 

Direct Portfolio College Savings Plan (Colorado)

Ugift

Yes

Yes

Yes

 

Connecticut Higher Education Trust (CHET)

 

Yes

Yes

Yes

 

DC College Savings Plan

Ugift

Yes

Yes

Yes

 

Delaware College Investment Plan

Fidelity College Gifting Program

Yes

 

 

Yes

Florida 529 Savings Plan

 

Yes

Yes

Yes

 

Path2College 529 (Georgia)

 

Yes

Yes

Yes

 

Hawaii’s College Savings Program

Ugift

Yes

Yes

Yes

 

Idaho College Savings IDeal

Ugift

Yes

Yes

Yes

 

Illinois College Savings Plans, Direct- and Advisor Sold

GiftEd

Yes

Yes

 

 

CollegeChoice CD (Indiana)

College Savings Bank, a Division of NexBank, Gifting Program

Yes

Yes

 

 

CollegeChoice 529 (Indiana)

Ugift

Yes

Yes

Yes

 

CollegeChoice Advisor 529 (Indiana)

Ugift

Yes

Yes

Yes

 

College Savings Iowa

Ugift

Yes

Yes

Yes

 

Kentucky Education Savings Plan

 

Yes

Yes

Yes

 

LearningQuest 529 Education Savings Program Direct- and Advisor Sold (Kansas)

Ugift

Yes

Yes

Yes

 

Maryland 529

GoTuition

Yes

Yes

Yes

Yes

MEFA’s U. Fund

Fidelity College Gifting Program

Yes

 

 

Yes

Michigan College Savings Plans, Direct- and Advisor-Sold

 

Yes

Yes

Yes

 

Minnesota College Savings Plan

 

Yes

Yes

Yes

 

MOST- Missouri’s 529 Savings Plan

Ugift

Yes

Yes

Yes

 

Achieve Montana

Ugift

Yes

Yes

Yes

 

NEST 529 College Savings Direct- and Advisor-Sold (Nebraska)

Ugift

Yes

Yes

Yes

 

SSgA Upromise (Nevada)

Ugift

Yes

Yes

Yes

 

The Vanguard 529 Plan (Nevada)

Ugift

Yes

Yes

Yes

 

USAA 529 College Savings Plan (Nevada)

Ugift

Yes

Yes

Yes

 

UNIQUE College Investing Plan (New Hampshire)

Fidelity College Gifting Program

Yes

 

 

Yes

New Jersey 529 College Savings Plans, Direct- and Advisor-Sold

Franklin Templeton Spryng

Yes

Yes

Yes

Yes

New York’s 529 College Savings Program, Direct- and Advisor-Sold

Ugift

Yes

Yes

Yes

 

College SAVE Direct- and Advisor Sold (North Dakota)

Ugift

Yes

Yes

Yes

 

Ohio CollegeAdvantage 529

Ugiftâ

Yes

Yes

Yes

 

Oklahoma 529 College Savings Plan

 

Yes

Yes

Yes

 

Oregon College Savings Plan

 

Yes

Yes

 

Yes

PA 529 (Pennsylvania)

Ugift

Yes

Yes

Yes

 

CollegeBound Saver (Rhode Island)

Ugift

Yes

Yes

Yes

 

CollegeBound 529 Advisor-Sold (Rhode Island)

Ugift

Yes

Yes

Yes

 

FutureScholar 529 Advisor and Direct (South Carolina)

 

Yes

Yes

Yes

 

TNStars 529 College Savings Program

 

Yes

Yes

 

 

my529 (Utah)

my529 Gift Program

Yes

 

 

Yes

Virginia529

Virginia529’s Gift Center

Yes

Yes

 

 

Vermont Higher Education Investment Plan

 

Yes

Yes

Yes

 

DreamAhead College Investment Plan

 

Yes

 

 

Yes

Smart529 Select and Direct (West Virginia)

Ugift

Yes

Yes

Yes

 

Edvest (Wisconsin)

 

Yes

Yes

Yes

 

Source: Savingforcollege.com research