A 529 plan allows you to save money for a child’s education costs. This tax-advantaged plan can be an effective way to build a college fund. However, there are rules regarding 529 plans you should know about, including 529 contribution limits, which differ based on where you live.
Learn how a 529 works and the max contributions to 529 plans in each state.
What Is a 529 Plan?
529 plans, also known as qualified tuition programs, are tax-advantaged savings plans that are designed to be used for qualified education expenses like tuition, housing, and books at postsecondary institutions such as college or trade school. Parents can also withdraw up to $10,000 of 529 funds annually to use for a child’s elementary or secondary school education at a public, private, or religious school.
Each 529 plan has a named beneficiary (the child the plan is for), and the account holder — usually a parent or grandparent — contributes savings to the plan up to the allowable 529 limits. Once contributions are made, you typically have a range of investment options to choose from, including mutual funds or exchange-traded funds (ETFs). Earnings and qualified withdrawals are not subject to federal taxes.
There are some 529 plan withdrawal penalties, however. For instance, any amount of money from the plan used for something other than qualified expenses for the beneficiary’s education incurs an income tax liability and a 10% penalty upon withdrawal.
Why Are There Max Contribution Limits?
While there are no yearly contribution limits to 529 plans, there are aggregate max contribution limits that apply to the total contributions to the plan. States sponsor and operate their own 529 education savings plans and set their own aggregate max contribution amounts. Many states have a total allowable contribution limit of $500,000 per beneficiary, though some states have lower or higher 529 limits. These limits are generally based on the cost to attend a four-year undergraduate or graduate program within the state.
Students who don’t have enough funds in a 529 plan to cover the cost of college can turn to other forms of financial aid, including scholarships, grants, and federal and private student loans.
529 Plan Max Contribution Limits by State
The max contributions to 529 plans vary based on the state plan you’re enrolled in. Below is a list of 529 contribution limits for 2024 in every state.
| State | Contribution Limit |
|---|---|
| Alabama | $475,000 |
| Alaska | $550,000 |
| Arizona | $575,000 |
| Arkansas | $500,000 |
| California | $529,000 |
| Colorado | $500,000 |
| Connecticut | $550,000 |
| Delaware | $350,000 |
| Florida | $418,000 |
| Georgia | $235,000 |
| Hawaii | $305,000 |
| Idaho | $500,000 |
| Illinois | $500,000 |
| Indiana | $450,000 |
| Iowa | $420,000 |
| Kansas | $475,000 |
| Kentucky | $450,000 |
| Louisiana | $500,000 |
| Maine | $545,000 |
| Maryland | $500,000 |
| Massachusetts | $500,000 |
| Michigan | $500,000 |
| Minnesota | $425,000 |
| Mississippi | $400,000 |
| Missouri | $550,000 |
| Montana | $396,000 |
| Nebraska | $500,000 |
| Nevada | $500,000 |
| New Hampshire | $596,925 |
| New Jersey | $305,000 |
| New Mexico | $500,000 |
| New York | $520,000 |
| North Carolina | $550,000 |
| North Dakota | $269,000 |
| Ohio | $541,000 |
| Oklahoma | $450,000 |
| Oregon | $400,000 |
| Pennsylvania | $511,758 |
| Rhode Island | $520,000 |
| South Carolina | $575,000 |
| South Dakota | $350,000 |
| Tennessee | $350,000 |
| Texas | $500,000 |
| Utah | $560,000 |
| Vermont | $550,000 |
| Virginia | $550,000 |
| Washington | $500,000 |
| Washington D.C. | $500,000 |
| West Virginia | $550,000 |
| Wisconsin | $567,500 |
| Wyoming | N/A (the state does not offer a 529 plan) |
States with Highest Aggregate Limits
The states with the highest allowed aggregate 529 contribution limits include:
• Arizona
• New Hampshire
• South Carolina
• Utah
• Wisconsin
These states have a maximum contribution limit greater than $550,000, with New Hampshire allowing the highest 529 limit in the U.S. at $596,925.
States with Lowest Aggregate Limits
State 529 programs that have the lowest total contribution limits of $350,000 or lower include:
• Delaware
• Georgia
• Hawaii
• New Jersey
• North Dakota
• South Dakota
• Tennessee
Georgia’s 529 savings plan has the lowest aggregate contribution limit nationwide at $235,000, while Wyoming doesn’t offer a state-sponsored 529 plan at all.
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Tax Benefits for 529 Plans
The advantages to 529 plans go beyond saving for your child’s college education. A 529 might unlock certain tax benefits. For example, earnings in the account grow tax-free and there is no federal income tax liability for qualified withdrawals. In some states, qualified 529 withdrawals might not be subject to state income tax either.
A number of states allow you to deduct your 529 contributions up to a certain limit from your taxable income on state income tax returns. For example, West Virginia lets state residents with an in-state 529 plan deduct up to $550,000 in annual contributions per beneficiary from their state income taxes. In Louisiana, residents are allowed a state income tax deduction for in-state 529 contributions of $2,400 ($4,800 if filing jointly) per beneficiary.
But not all states allow you to deduct 529 contributions. For example, California, Kentucky, and Hawaii don’t offer a state tax deduction or credit for 529 contributions on their state income tax returns. However, qualified 529 distributions are exempt from income tax in all three states.
Nine states (Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming) have no state income tax so there is no 529 deduction in those states. (As a reminder, Wyoming has no 529 plan.)
Tax deduction limits and rules vary by state, so check with yours.
529-to-Roth IRA Rollover
Traditionally, a downside to saving money in a 529 plan has been the 10% penalty and potential tax liability incurred on earnings for non-qualifying withdrawals. This might come up if you over-saved in the account, or if your child chooses not to go to college.
The SECURE 2.0 Act of 2022 has addressed these concerns. Beginning in 2024, unused 529 funds can be rolled over into a Roth IRA under the original beneficiary’s name without penalty or tax implications.
There are some guidelines for a 529 to Roth IRA rollover. The 529 plan must have been active for at least 15 years, and the rolled over funds must have been in the account for at least five years. Finally, the maximum annual rollover contribution permitted for 2024 is $7,000, based on Roth IRA 2024 contribution limits (IRA contribution limits typically change annually). Despite these rules, the ability to do an IRA rollover gives 529 account holders a penalty-free option, if needed.
How to Maximize Your 529 Contributions
If you’re considering a 529 for your child, you are not limited to choosing a 529 plan from the state you reside in. Many states allow out-of-state residents to open a 529 account. Here are some tips on how to maximize your savings in a 529.
• Explore plans from multiple states and compare their tax benefits and fees to potential tax benefits and fees of your state’s plan.
• Check to see if your company offers 529 plan employee benefits. Some employers now provide these benefit plans, which allow you to contribute directly from your paycheck.
• Many states offer direct-sold plans in which you select the investments in the plan yourself, and broker-sold plans in which a broker selects investments for you. Broker-sold plans typically come with more fees. Consider enrolling in a direct-sold 529 plan to help save on fees.
• Anyone, including grandparents and family friends, can contribute to a 529 plan, so make sure loved ones are aware that you have a 529 for your child to save for college. They may want to make a contribution to the plan as a birthday gift, for instance.
• You can open a 529 as soon as the beneficiary has a Social Security number. Start saving early and set up automatic contributions to the plan. The longer the money is invested, the more time it has to grow.
The Takeaway
A 529 can be a good way to save for your child’s education. The earlier you open a 529, the more time you have to contribute and save, and the more time the money in the plan has to grow. Just be sure to find out the 529 maximum contribution limits for the state in which you have the plan.
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FAQ
What happens if you contribute too much to a 529 plan?
Contributing more than a 529 plan allows might result in taxes and penalties. If you over-contribute to a 529 account beyond the 529 limit, one option is to change the primary beneficiary of the plan to another child to be used for their education savings. You can also consider rolling the funds into a Roth IRA for the original beneficiary. Either option can help you avoid a taxable event.
What is the 5-year rule for 529 plans?
You’re allowed to contribute up to $18,000 ($36,000 if filing jointly) per beneficiary in 2024 without paying a gift tax. This amount is not counted against your lifetime gift tax exemption. To contribute more in one year to a single 529 recipient without impacting your lifetime gift tax exemption, you can front-load up to five years of contributions (up to $90,000 in 2024) into the 529. Doing so avoids impacting your lifetime gift tax exemption, but it also means that you can’t make additional contributions to the same beneficiary for the next five years.
What happens to a 529 plan if your child doesn’t go to college?
If your child doesn’t go to college, you have a few options for a 529. You can consider rolling the funds into a Roth IRA for the beneficiary, for instance. Or you could change the primary beneficiary to another family member, like a younger sibling.
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