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529 Contribution Limits for 2014

As you create your savings plans for 2014, one of the questions you may be wondering about is just how much you can contribute to your 529 plan for the year.

In fact, there is no rule that specifically states 529 plan contribution limits at the federal level. Instead, these fall under the restrictions imposed on gifts by the IRS. For 2014, this limit remains the same as 2013 at $14,000. The restriction is per beneficiary, per person, so a married couple could contribute $28,000 to a 529 plan per beneficiary without incurring gift tax penalties.

Another great feature of 529 plans is that you can front-load a contribution for the next five years. This means that a person can contribute up to $70,000 at once to a single beneficiary ($140,000 for a married couple) without incurring gift taxes, as long as no further gifts are made to the same beneficiary until the sixth year.

At the state level, however, there could be restrictions when it comes to funding a 529 college savings plan. If you’re adding money to an existing 529 plan or are considering starting one, make sure you check what other restrictions might be in place for that specific account.

If you choose to exceed the $14,000 529 contribution limit for 2014, then your contributions will be subject to gift tax. You can deposit as much money as you want in a 529 account (within the limits of the plan itself) as long as you’re willing to pay the taxes.

It’s important to plan how much money you need to save for your child’s higher education. Although most people don’t have this problem, saving too much could result in higher penalties and tax rates from the IRS than if the excess money was invested elsewhere, since 529 plans are intended to be used only for higher education. If you do end up with more money in a 529 plan than is needed, you can always change the beneficiary of the plan and continue to save for someone else’s higher education such as another child, or even yourself!

Investing in a 529 college savings plan is one of the best ways to fund an education. If you have questions about contribution limits or are planning to deposit a large sum into an account, you may want to consult a qualified 529 plan expert who can analyze your specific circumstance.

Posted by Marcos Cordero
Wed, January 8th, 2014 @08:56AM
 
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January 8, 2014 | Marcos Cordero
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