Contributors
Contributors are the people who open and maintain control over a 529 account. A contributor can be any adult (must be 18 or older) at any income level. The account is opened with the contributor’s Social Security number and street address. The contributor is the account owner and maintains control over the account until the money is used.
Contributions to a 529 plan are considered to be gifts under federal tax law. Normally, someone can give up to $16,000 per year before they have to worry about paying the federal gift tax. This amount is called the annual gift tax exclusion. There is a special rule for 529 plans allowing a contributor to make a lump-sum contribution of five times the annual gift tax exclusion and spread the contribution out over five years for purposes of the gift tax. Therefore, in 2023, an individual could contribute $85,000 to a 529 plan today and count it as five $17,000 gifts over the next five years, paying no gift tax and losing nothing from his lifetime gift tax exclusion. A married couple who files jointly could similarly make a $170,000 contribution and spread it over the next five years (as five $34,000 gifts) for purposes of the gift tax. Remember, however, that the contributor would not be able to give any more without triggering the annual gift tax. Note too that anyone can contribute to a 529 plan, including relatives and friends.
In many states, contributions to a 529 plan can be deducted from state taxe