529 Plan Tax Treatment
July 29th, 2009
Question: do contributions to a 529 savings plan qualify for the gift tax exclusion?
I understand that an individual can give as much money they want for education expenses without incurring a gift tax, but can you get that same tax treatment if those contributions are into a 529 Plan?
Answer: Contributions to a 529 Plan are considered gifts and are subject to the same rules as any other gifts, with one exception. The exception is that an individual can choose to treat a contribution to a 529 Plan as being made over five years. This is done by filing Form 709 with the tax return.
Using this exception, an individual could contribute as much as $60,000 in 2006 over five years and exclude all of it.
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