Section 529 Plans

October 29, 2018
Review your Section 529 plan now

While school finances may be the last thing on your mind as you head into the holiday season, a review of your Section 529 education savings account now could save you tax dollars come next year. Here are three ideas to consider before Dec. 31:

  • Evaluate your plan investments. Is everything going as planned? Keep in mind that you can generally change the investments in 529 plans twice a year without federal income tax consequences. Some reasons you may make a switch include poor investment performance, a change in beneficiary, or the need for more liquidity to protect capital as the beneficiary reaches school age.
  • Coordinate withdrawals. Add up the qualified education costs you paid during the year. Then check your eligibility for education tax breaks such as the American Opportunity Tax Credit. You can claim an education credit in the same year you withdraw 529 plan funds. However, you can’t use the same expenses to claim a credit and take a tax-free distribution from your 529 plan.
  • Make contributions. You can contribute up to the annual $15,000 gift tax exclusion and avoid paying federal tax. You can also make an election to contribute as much as five years worth of gifts — up to $75,000 per account — in a lump sum.

Contributions made by year-end may be deductible on your state income tax return.

Questions about how your tax situation may affect a 529 plan? Call today.


“Tax Tips” are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in “Tax Tips,” or if you’d like to be on our mailing list to receive other tax information from time to time, please contact our office.

The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.

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