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March 13, 2024
Question

I contributed the maximum 5-year amount to my kid’s 529 last year. Tuition is due in April. Can I withdraw for their tuition 10k in April and contribute 10k later in Oct?

  • March 13, 2024
  • 1 reply
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Or am I not allowed to contribute again since I maxed out contributions for 5 years last year?

1 reply

Hal_Al
Employee
March 13, 2024

Q. I contributed the maximum 5-year amount to my kid’s 529 last year. Tuition is due in April. Can I withdraw for their tuition 10k in April and contribute 10k later in Oct?

A. Yes, but.

 

There is no IRS limit* to how much you can contribute to a 529 Plan (the plan itself may have a limit, check with them ).  So, yes, you can contribute another $10K, at any time. 

 

The "maximum 5-year amount" is in reference to the requirement to file a gift tax return. Since you have met the limit, any additional contributions will trigger the requirement to file a gift tax return.

 

"Gift Tax" is somewhat of a misnomer.  Even though a gift tax return may be required, very few people ever actually pay federal gift tax. The purpose of the gift tax return is usually only to document a reduction in the allowable estate tax exemption.
See https://turbotax.intuit.com/tax-tools/tax-tips/Tax-Planning-and-Checklists/The-Gift-Tax-Made-Simple/INF12127.html  

 

https://www.savingforcollege.com/article/how-much-can-you-contribute-to-a-529-plan#:~:text=One%20of%20the%20many%20benefits,2022%20and%20%2417%2C000%20in%202023.

 

*"Unlike IRAs or 401(k)s, there are no annual contribution limits for 529 plans. However, there are maximum aggregate limits, which vary by plan. Under federal law, contributions to a 529 plan cannot exceed the expected cost of the beneficiary’s qualified higher education expenses. Limits vary by state, ranging from $235,000 to $550,000."