Cash In On This Gift Tax Break For Section 529 Plans
Published Wednesday, December 31, 1969 at: 2:00 PM EST
If you're worried about saving money for your children's college educations, you should investigate Section 529 plans. These tax-favored accounts enable you to sock away money that can grow without current taxes. And the funds you withdraw to pay most college costs are also exempt from income tax.
Section 529 plans are operated by states, and although each state has its own ceiling for contributions, most limits are well into six figures.
But there's one catch. When you contribute money to a Section 529 account on behalf of a child or grandchild, the transfer is subject to gift tax rules. The current annual gift tax exclusion is $14,000 per recipient, or $28,000 for a joint gift by a married couple. If you give more than that amount, the excess will reduce your lifetime exemption from gift and estate taxes.
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