529 Plans for education savings

If you are planning for the education of children or grandchildren, consider making an annual contribution to a 529 plan. Many states offer a tax benefit in the form of a deduction or credit for contributing to a 529 plan. 

Contributions to 529 plans are considered gifts for tax purposes. In 2023, you can give up to $17,000 per recipient without triggering a gift tax. However, a special rule allows you to “superfund” five years’ worth of “annual gifts” into a 529 in a single year without gift-tax consequences. For 2023, you can contribute up to $85,000 per 529 plan beneficiary and treat the contribution as if it were made over five consecutive years. This superfunding feature allows a donor to front-load a 529 plan and over time removes assets from the donor’s estate. Additional details on superfunding can be found here.

Review the rules for your state plan and consult with your tax advisor to confirm the state tax benefit available.