Tax Time is Over … Now What? Let’s Talk 529 Plans!
By now, you’ve (hopefully) filed your tax return, celebrated (or sulked), and moved on. But don’t wait until next March to start thinking about your future taxes—get ahead of the game now! One area worth a little attention is education funding.
Now, before you say, “I don’t have kids, this isn’t for me,” hold up! Education funding isn’t just for parents. Grandparents, aunts, uncles, and even generous friends can give the gift of knowledge to future generations—and maybe even snag a tax break in the process.
529 Plans: What’s In It for You?
While 529 contributions aren’t deductible on your federal taxes, some states do offer a tax break. And, of course, the IRS has rules (because when don’t they?). In 2025, you can make an annual contribution up to $19,000 per child if you’re single, or $38,000 if you’re married filing jointly—without triggering gift tax implications.
Feeling extra generous? You can superfund a 529 plan with up to $95,000 (single) or $190,000 (married filing jointly) in one year. But there’s a catch: you’ll need to file Form 709 and spread the gift over five years for tax purposes. Each state may have lifetime maximums that are even higher.
The Fun Part: Using That 529 Money!
Not all education expenses are created equal. The IRS allows tax-free withdrawals for qualified education expenses (QEEs)— but keeping solid records is key (because audits aren’t fun).
Covered Expenses (a.k.a. The Good Stuff)
*Tuition & fees (yes, some K-12 tuition counts!)
*Room & board (but only if the student is enrolled at least half-time)
*Computers, software, and internet
*Books & supplies
*Some loan repayment and special needs equipment
What’s NOT Covered (a.k.a. The Fun Killers)
✘ Extracurricular activity fees
✘ Health insurance
✘ Application and testing fees
✘ Travel costs—even for study abroad!
Bonus Tax Perks!
Beyond the 529, you might be eligible for:
The American Opportunity Tax Credit (AOTC) – Up to $2,500 per year for 4 years
The Lifetime Learning Credit (LLC) – Up to $2,000 per year (with a $10,000 lifetime max
Of course, tax credits come with income limits, rules, and fine print. And to make things even trickier, you can’t double-dip by using the same expenses for multiple tax breaks.
The Bottom Line? Talk to a Pro
We’ve only scratched the surface here. Each state has its own 529 plan, rules, and benefits. And if you don’t use the funds for education, you still have options to avoid penalties and taxes. Want to make the most of your education savings strategy? Consider working with a CERTIFIED FINANCIAL PLANNER® to help you navigate the fine print and maximize your tax benefits.
