What are my Options for Funding a 529 College Savings Plan?

By Financial Advisor Katie Bensel | Updated June 17, 2022

529 College Savings Plans are accounts that any individual can establish for any recipient of their choosing with the intention of funding qualified educational expenses. While there are no limits to how many individuals you establish 529 college savings plans for, there are annual contribution limits for each recipient.

The maximum annual contribution per donor, per recipient for 2022 is $16,000. This limit is based on the yearly gift tax exclusion limit. For spouses, this means they can contribute $32,000 per child (recipient) annually without exceeding their annual gifting limit.

What about "Superfunding" a 529 College Savings Plan?

Current tax laws allow individuals to “superfund” a 529 college savings account, which allows an individual or couple to make up to five years of contributions at one time, while still utilizing the annual gift tax exclusion.1

Superfunding a 529 college savings account is an effective way to capitalize on the power of compound interest over a longer timeline. However, keep in mind that there are some intricacies to the superfunding rule that should be understood before it is utilized.

If an individual (donor) contributes an amount between $16,001 and $80,000 in a single year to a 529 College Savings Plan, those funds will be classified as “superfunding” and the amount will be evenly divided amongst the next 5 years of funding. (Ex: An individual contributes $50,000 to their child’s 529 college savings account in 2022. This contribution is classified as “superfunding” and is now classified as a $10,000 yearly contribution for the next 5 years). An individual does not have the ability to classify $16,000 of the $50,000 as a 2022 contribution and have only the remaining $34,000 split amongst the next 4 years. An even split among 5 years is the only option when superfunding. These examples are based on the 2022 yearly gift tax exclusion of $16,000 per donor, per recipient.

The best way to understand the intricacies of these various paths forward is through examples. Below are three examples of funding strategies and how they would play out over the next six years.

Scroll right to see all of the columns on the table below.

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Example 1
Maximize the yearly contribution limit
$16,000 $16,000 $16,000 $16,000 $16,000 $16,000
Example 2
Partial Superfund with additional yearly contributions

Counts as $10,000/year over 5 years

($10,000 from superfund)

($10,000 from superfund)

($10,000 from superfund)

($10,000 from superfund)
Example 3
Maximize superfunding
$80,000 $0 $0 $0 $0 $80,000

All examples above assume the 2022 yearly contribution limit of $16,000 per donor, per recipient for all six years.

What if I contribute over the limit?

If your contributions exceed the yearly gift tax exclusion of $16,000 per donor, per recipient and you have not previously utilized the 5-year superfund rule, your contribution will be viewed as a superfund event and will be split evenly among 5 years.

When contributing to a 529 college savings plan, you must always be cognizant of any other gifts made to that recipient during the year. If your total gift contributions per recipient exceed that year’s gift tax exclusion limit, after considering any ability to classify contributions as a superfunding event, the excess contribution above that yearly limit goes against your lifetime estate-and-gift tax limits.

In 2022, the lifetime estate-and-gift tax limits have been adjusted due to inflation and are currently $12.06 million per individual and $24.12 million per couple.2

1. 10 Rules for Superfunding a 529 Plan, Savingforcollege.com, February 25, 2021.
2. Estate and Gift Taxes 2021-2022: What's New This Year and What You Need to Know, The Wall Street Journal

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