2024 Year-End 529 Checklist

1. Make Year-End Contributions

Maximize Annual Gift Exclusions: Contributions to a 529 plan are considered gifts for tax purposes. In 2024, you can contribute up to $17,000 per beneficiary ($34,000 for married couples filing jointly) without incurring gift taxes.

Superfunding: Consider "superfunding" your 529 plan by making up to five years' worth of contributions at once ($85,000 for individuals or $170,000 for couples). This uses your annual gift exclusion for the next five years but provides a significant growth advantage.

2. Check State Tax Deduction Deadlines

Many states offer tax deductions or credits for 529 plan contributions. Confirm your state’s rules and deadlines to ensure your contribution qualifies for 2024.

Some states allow contributions up until December 31, while others may have earlier deadlines.

3. Use Year-End Windfalls

If you receive a bonus or other windfall at year-end, consider allocating some of it to your child’s 529 plan. Investing this money earlier gives it more time to grow tax-free.

4. Coordinate with Family Contributions

Discuss with grandparents or other relatives who may wish to contribute. Their gifts can also qualify for the annual gift exclusion and state tax benefits.

5. Take Advantage of Rollovers and Transfers

If your current 529 plan isn’t performing well or doesn’t offer desirable investment options, you can roll over funds to another state’s plan. Check for restrictions or penalties and ensure compliance with IRS rules.

6. Review Investment Options

Year-end is a good time to review your 529 plan investments. Consider adjusting the portfolio based on the child’s age or changes in market conditions.

Younger children may benefit from more aggressive growth strategies, while older students might require more conservative investments as college approaches.

7. Plan for Qualified Expenses

Ensure you understand which expenses qualify for tax-free withdrawals. These include tuition, room and board, books, and technology for eligible schools.

K-12 tuition expenses may also be covered up to $10,000 annually, depending on state rules.

8. Avoid Excess Contributions

Be mindful of the plan’s contribution limits. Overfunding may result in penalties or tax consequences if the funds are not used for qualified expenses.

9. Maintain Documentation

Keep thorough records of contributions and withdrawals to ensure compliance with IRS rules and simplify tax filing.

10. Plan for Scholarship Situations

If the beneficiary receives a scholarship, 529 funds can still be used for non-qualified expenses without incurring penalties (though earnings may be subject to income tax).

These strategies can help you make the most of your 529 plan, both for education savings and potential tax benefits. Always consult with a financial advisor or tax professional to ensure you’re making decisions that align with your specific goals and circumstances.