As we head towards the final months of the year, we wanted you to be aware of key tax planning opportunities related to your education funding plans: Tax Planning Considerations For 529sNearly 40 states offer a tax benefit for 529 contributions. The details of that benefit can vary by state: - For most states, you'll need to make your 529 contributions by December 31 to be claimed for the 2024 tax year. However, there are a handful of states that allow contributions for a 2024 benefit up until April of the following year.
- Residents in Georgia, Indiana, Mississippi, Oklahoma, South Carolina and Wisconsin have until April 15. Residents in Iowa have until April 30.
- There are nine states that allow taxpayers to claim a state tax benefit for contributing to an in-state plan or an out-of-state plan.
- Arizona, Arkansas, Kansas, Maine, Minnesota, Missouri, Montana, Ohio and Pennsylvania have state tax parity. Check the state's benefits for which you pay state taxes for more detail.
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A Unique Gifting Opportunity For 529s:
The Five Year Gift ExclusionFor 2024, the IRS allows individuals to gift up to $18,000 per person tax free ($36,000 if married, filing jointly). For those interested in accelerating their contributions to a 529, they can elect to contribute up to $90,000 in 2024 ($180,000 if married, filing jointly) by treating it as a contribution made over a five-year period, using the IRS 709 tax form. The annual gifting amount is scheduled to increase to $19,000 in 2025. To maximize this 529 gifting benefit, an individual could make a gift of $18,000 in 2024, and make a five-year gift of $95,000 the following year. This allows an individual to gift $113,000 to a beneficiary without surpassing the annual gift tax or the lifetime gift and estate tax. You can learn more about tax-free gifting strategies in the article below. If you have any questions about your education or gifting strategies, please don't hesitate to give us a call. |
