By Dr. James M. Dahle, WCI Founder
A 529 plan is a college savings account called a Qualified Tuition Program (QTP) by the IRS. Federal law allows for each state to create one or more 529 programs. Any withdrawals used for approved educational uses are federal and state income tax-free. In addition, some states give a tax deduction or credit for contributions to a 529 account (see Best 529 Accounts to determine your options). Today, we'll go a step further and explain how you can superfund a 529.
What Can a 529 Plan Be Used For?
Approved educational uses include:
- Tuition
- Fees
- Books, supplies, and equipment
- Special needs services for a special needs beneficiary
- Room and board (must be at least half-time), up to the allowance for room and board
- Computer equipment, software, and internet access
- Apprenticeship program fees and expenses
- Principal and interest on qualified student loans of the beneficiary or sibling (up to $10,000)
- K-12 tuition (up to $10,000 per year)
How Does a 529 Plan Work?
If you take money out of your 529 plan for any other reason, you will owe taxes on any gains at ordinary income tax rates AND a 10% penalty. You can also take out amounts equal to any scholarships received (including military academies), work assistance, and VA assistance. All of those would be penalty-free but not tax-free. You can also withdraw the money penalty-free (but not tax-free) if the beneficiary is disabled, although in many cases, you may wish to move the money into an ABLE account (the rollover does count toward the ABLE annual contribution limit, unfortunately).
529s Are for Rich People
For the most part, 529 accounts are a tax break for high earners, like most of those who read this blog. Lower earners could have trouble coming up with any money to save for college, and they benefit much less from the tax benefits of a 529. In fact, low earners that do save for college are probably better off using a simple taxable account most of the time since, for 2022, the tax rate on qualified dividends and long-term capital gains is 0% up to a taxable income of $41,675 ($83,350 married filing jointly). You have a lot more flexibility with a taxable account than a 529, so there's no sense in using it unless it provides you substantial tax benefits.
Superfunding 529s
Even most regular readers of this blog have no need to “superfund” a 529. It's hard enough to just max out a single annual 529 account contribution, especially if you have multiple children. Imagine a household with four children earning the average physician income of $275,000. If this was 2022, that'd be $16,000 x 4 = $64,000, or 23% of the gross household income! Very few of us have set up our financial lives in such a way that we can do that. Frankly, there is rarely a need to do so. Imagine you don't even start saving until the kid is 8 years old and then you put in $16,000 a year for 10 years. Earning 8% a year, you still end up with:
=FV(8%,10,-16000) = $231,785
That pays for an awful lot of college. Used judiciously and combined with some work, scholarships, and contributions from current parental cash flow, it could quite possibly pay for both undergraduate and professional school.
However, there are a few of us who either have a lot of savings or a lot of disposable income and have become interested in “superfunding” a 529.
529 Max Contribution
The annual contribution limit to a 529 plan is the same as the gift tax exemption, $17,000 for 2023 (it was $16,000 in 2022). Superfunding is simply taking advantage of a provision of the tax code that allows you to put up to five years of contributions into the account all at once. So, you can put $85,000 into a 529 at the same time. If you are married, you can put in $170,000 all at once (might need to use two separate 529s). You can do it again five years later—and then again five years later. If you did this in 2022, when the limit was $16,000, you could theoretically have as much as (again at 8%).
=FV(8%,5,0,-160000) = $235,092 after 5 years
=FV(8%,5,0,-235092-160000) = $580,520 after 10 years
=FV(8%,5,0,-580520-150000) = $1,073,374 after 15 years and
=FV(8%,3,-16000,-1073374) = $1,404,085 at the time of enrollment at age 18
I say theoretically because every state has a limit of how much can be in a 529 plan (it ranges from $235,000-$550,000 in 2022) before you are prohibited from contributing more. But honestly, you could work around this simply by opening up a 529 plan in another state once you hit the limit in your state. You could get even more in there by starting a 529 for yourself long before the kid is born and then just changing the beneficiary to your kid after they are born. Or you could open accounts for a dozen of their cousins and then change the beneficiary to your kid. It's entirely possible to have millions and millions in a 529 account for one child.
Should I Go for the Maximum 529 Contribution?
The problem with going for the maximum possible 529 contribution (assuming you can afford to do so) is that you will likely have a hard time spending it all on that child's education. The problem becomes compounded if you have done the same thing for multiple children. Then, you are stuck with a bunch of money in a 529 account. If you find that you have far more money than needed in a 529 account, here are your options, listed in order of desirability:
- Change the beneficiary to your grandchild (or another qualifying family member)
- Pull out as much as you can, paying taxes at your ordinary income tax rate on any gain but WITHOUT paying a penalty, for scholarships and other approved reasons
- Pull the money out, paying taxes at your ordinary income tax rate on any gains AND a 10% penalty
Some people have looked at using 529s for retirement, figuring that all that tax-deferral must be worth more than that 10% penalty. However, if you run the numbers of a 529 account vs. a taxable account for retirement in any honest way, the taxable account will win out for three reasons:
- The slightly higher costs of the 529
- The 10% penalty
- The fact that gains are now taxed at ordinary income tax rates instead of the lower long-term capital gains rates
Don't believe me? Fine. Let's run the numbers. We'll assume something very tax-efficient, such as a total stock market fund. We'll use a single $100,000 contribution. We'll assume a period of 30 years before withdrawal. We'll assume the top income tax bracket throughout since those are the folks that would consider doing this. We'll assume an additional cost of 0.1% in the 529 plan. We'll assume a pre-fee, pre-tax return of 8% a year.
Taxable account
Grows at 8% – (2% yield * (1-23.8% qualified dividend rate)) = 7.52%
=FV(7.52%,30,0,-100000) = $880,395
Then you pay capital gains taxes on the gains leaving you:
($880,395 – $100,000) *( 1-23.8%) + $100,000 = $694,661
529 account
Grows at 8% – 0.1% additional cost = 7.9%
=FV(7.9%,30,0,-100000) = $978,686
Now you have to pay the taxes at ordinary income rates PLUS 10%
= ($978,686 – $100,000) * (1-47%) + $100,000 = $565,704
Note that, for sake of simplicity, my comparison DID NOT adjust for the fact that the dividends reinvested in the taxable account would not be taxed twice. This, of course, skews the results in favor of the 529 account, further strengthening my case that it is dumb to save for retirement in a 529.
What About a Multi-Generational 529?
Clearly, you want to use a 529 for education. If your kid doesn't use it up, you use it for your grandkid. If they don't use it up, then it can go to their kid. And so on for dozens of generations, right? Well, there is one issue with doing this. But first, let's explain how estate planning laws and 529s interact.
First, a 529 is a pretty cool account from an estate planning perspective. It is the only account in which the contribution is removed from your estate but over which you still retain full control, including the ability to liquidate the account and spend it on yourself at any time (after paying any applicable income taxes and penalties, of course).
Imagine superfunding the 529s for five grandchildren all at once. You just removed OVER $1.5 million from your estate. Cool trick. However, if you die during the five years after “superfunding” a 529, the extra contributions for the years after your death are pulled back into your estate.
When you die, the beneficiary of the account does not change but, depending on the state, the new owner either becomes your designated contingency owner OR the beneficiary themself. No big deal, you can probably work around that if you're trying to do the multi-generational thing.
If the beneficiary dies, you can pull out the money penalty-free (but not tax-free), or preferably, just name a new beneficiary. No big deal here either.
So what's the big deal? The big deal is the Generation Skipping Tax (GST). The GST is put in place to ensure that estate taxes are charged for every generation. Let's say you have a $500,000 529, and you want to change the beneficiary from your child to your grandchild. You can only give that grandchild $17,000 per year [2023] ($34,000 if married) without using up your gift/estate tax exemption ($12.92 million for an individual, $25.84 million jointly for 2023). So, if you gave $500,000, you would use up $483,000 in exemption. When you run out of exemption, gift taxes start kicking in (called estate taxes if your estate runs out of exemption after death).
It is entirely possible that this 529 account could be passed down generation to generation without any of the generations actually being wealthy enough to trigger the GST/Gift/Estate tax. But it will certainly add an element of complexity to your estate planning. Plus some person down the line is probably just going to liquidate it and use it for their house down payment. Or to just blow it all on a Tesla demolition derby. Probably best to set up some kind of trust instead if this is really what you want to do.
How 529 Superfunding Works
We've established you probably shouldn't go for the maximum or try to use a 529 as a multi-generational education trust, but you may still want to frontload your 529 savings by superfunding once or twice. Should you actually do it?
There are three reasons you might not want to do it.
- You might have a better use for your money. Paying off your own credit cards, student loans, or even mortgage may be a better use of your money. Maxing out your retirement accounts certainly is. We tend to buy homes at about the same time in life as kids are born too, so you may need some down payment or closing cost money.
- You might lose out on state tax benefits. In most states, if you fund the 529 all at once, you only get a tax deduction or credit for that first year. Check with your state tax laws or 529 provider, but that's probably the way yours works.
- There is some paperwork. Normally, 529 contributions are really straightforward. That's not the case when you superfund.
You should also be aware that you can actually put more than $80,000 ($160,000 married) into a 529 in a given year. It just uses up your estate tax exemption. If you don't care about that, I guess you could put $529,000 into your California 529 plan all at once and let it ride!
Technically, “superfunding” means making the five-year election on your contributions. If you contribute $80,000, it's really straightforward. You make the five-year election and you don't contribute anything for the next five years. But what if you only contribute $50,000? What happens then? Well, that $50,000 is still spread over all five years, $10,000 per year. You can still contribute another $6,000 each year. Or you can make another “superfunding” contribution the next year of, say, $30,000. Then, $6,000 of that would be applied each year for the next five years.
So how do you actually make the five-year election? You do it on IRS Form 709. Including its four schedules, it's five pages long (the same length as the corporate tax return form, incidentally). Still want to superfund? Maybe not. The Form 709 Instructions discuss 529 superfunding on page 7.
Here's what the IRS writes on Line B (Qualified Tuition Programs (529 Plans or Programs)) (and remember, in 2021, the 529 annual limit was $15,000):
“If in 2020, you contributed more than $15,000 to a qualified tuition plan (QTP) on behalf of any one person, you may elect to treat up to $75,000 of the contribution for that person as if you had made it ratably over a 5-year period. The election allows you to apply the annual exclusion to a portion of the contribution in each of the 5 years, beginning in 2020. You can make this election for as many separate people as you made QTP contributions. You can only apply the election to a maximum of $75,000. You must report all of your 2020 QTP contributions for any single person that exceed $75,000 (in addition to any other gifts you made to that person). For each of the 5 years, you report in Part 1 of Schedule A one-fifth (20%) of the amount for which you made the election. In column E of Part 1 (Schedule A), list the date of the gift as the calendar year for which you are deemed to have made the gift (that is, the year of the current Form 709 you are filing). Do not list the actual year of contribution for subsequent years. However, if in any of the last 4 years of the election, you did not make any other gifts that would require you to file a Form 709, you do not need to file Form 709 to report that year's portion of the election amount.”
And here's what that section of the form would look like:
That $15,000 gets totaled up at the end of Schedule A and transferred onto line 1 of Part 2 on the main form (page 1) like this:
Not too bad, really. And if you don't give any other gifts, you don't actually have to file this form for the next four years.
Here are some other rules.
- You cannot make the five-year election with less than $17,000.
- The five-year election is all or nothing. No making a $50,000 contribution and calling $17,000 of it this year's contribution and making the five-year election for the rest of the $33,000.
- There are no joint elections. If you want to do it for both you and your spouse, you have to do two Form 709s. You might potentially want to just do it for one spouse.
- Don't forget other gifts. All gifts you give that person count toward the $17,000 per year limit. It isn't a separate 529 gift limit.
529 superfunding is a way to get a bunch of money into a 529 account all at once. Even though it probably won't be used by the vast majority of white coat investors, it's still an option because it can certainly be a useful estate planning technique.
What do you think? Did you superfund your 529 accounts? Why or why not? Are you glad you did? Comment below!
So my state allows a state tax deduction up to $3,380 per beneficiary. So could I just set up a bunch of different 529s in different beneficiaries names and SS numbers (say 4 people) and get the $3,380×4=$13,520 state tax deduction?
Then I could rename the beneficiary of each account to my one child before I want to start using it for them?
This would be better because I could get a state tax deduction for every dollar contributed every year I contribute. Or is there a rule against this?
I don’t know of a rule against it. Quite a bit of hassle for a relatively small amount of tax break, but I think it can be done. Might want to wait a year or two before changing the beneficiaries.
That’s what I do. I have one child and am married. In “My” account, I put the state tax deduction for myself, my child, and my wife. Then I opened an account for my “spouse,” and put the state deduction in for myself, my child, and my wife. Then plan to roll it over later on to my kid. Maybe “small” benefit but more substantial than TLH (at least in my state) which I also do.
Would it make sense to fund a 529 for myself (attending) to pay for my refinanced student loan debt of ~$300,000?
You can only use $10K for student loans, so no.
Man, this post is already out of date since I wrote it. Gift tax exemption amount and 529 contribution amount is up to $16K in 2022.
One other correction. the $10,000 withdrawal toward student loan principal and interest is a LIFETIME limit per beneficiary. Not an annual limit.
My understanding is that each person can have a total of $10,000 applied toward their student loans from all sources combined although that part is not quite as clear.
Obviously you cannot then take a student loan interest deduction for any interest paid from a 529.
https://www.investopedia.com/articles/personal-finance/020217/can-i-pay-student-loans-my-529-plan.asp
You’re absolutely right. Thanks for the correction. Not sure why I wrote it that way because I knew that.
If in 2022, I superfunded a 529 plan in Utah in amount of $80,000 in my own name so that in the future I can transfer it to my child (in about 8 years), do I still need to complete form 709 by 2023 tax deadline of april 18th, 2023? Would it be like gifting it to myself in that scenario or would I not have to fill out form 709 because it’s in my own name and I technically haven’t gifted it to anyone yet? Thanks in advance!
I don’t see why you would have to fill it out if there is no gift. I’m not sure that changing the beneficiary later allows you to superfund a gift any longer though like it would if you superfunded one for someone else.
Yeah that makes sense why I won’t need to file a 709 form for year 2022. I guess I was just worried that because I did the act of superfunding in 2022 and whether putting in my own name would be technically me gifting to a donee (myself);I wasn’t sure how the IRS defined this. Just wondered how I would help the IRS account for the act of superfunding for 5 years. At the moment I I didn’t want to disrupt the beneficiary’s medicaid insurance eligibility (they live with their mother)
I don’t think the IRS cares and the 529 probably doesn’t either. It is going to be an issue when you try to change the beneficiary though. You’re going to use up a bunch of estate/gift tax exemption when you do that.
I heard this on a podcast the other day that changing beneficiary would trigger the gift tax and so I was looking for a reference here. Do you have a source that says that changing the beneficiary on your 529 will trigger the gift tax and count towards lifetime exemption? Everything I have found on other sources including my 529 site say that it does not create a taxable event. And if this is true, would a possible strategy (loophole) be to fund your own 529 (no gift tax to yourself) and then just change beneficiary…..
https://www.virginia529.com/learn/faqs/?gclid=Cj0KCQiAsoycBhC6ARIsAPPbeLtk_SgXRzUfcf85PTsrq8FxZPrmant09BZOSuPH1opqh1_ee0k4LqQaAhnBEALw_wcB
https://www.putnamwealthmanagement.com/a-529-college-savings-plan-can-be-flexible-as-situations-change#:~:text=A%20529%20account%20owner%20can,as%20a%20non%2Dqualified%20distribution.
It depends on who you change the beneficiary to. Same generation, no issue. New generation, gift tax rules apply.
If you don’t have a big 529 or don’t have an estate tax problem, no biggie. But if you have both those issues, it could be a problem.
You can fund your own and then change it to your kids. But once your kids are born, I’d make them the beneficiary for new contributions.
Can you/your kids keep education receipts and then turn them in years later and take the money out at a later time after it has continued to grow tax free…similar to HSA?
No, not an option. It has to come out the same year you spend it.
Thanks this is a good topic. It would be good to see a “how to” on the forms as an example. If I understood correctly the form you’re showing is just a normal 709 contribution, no superfunding, no multi year reporting example.
I have a vanguard 529 account(Nevada state). In that I don’t have to put beneficiary or I can put myself as a beneficiary. So if i contribute more than $16,000, do I have to report it to IRS for gift tax purpose.
technically there is no beneficiary or default beneficiary is me.
What if the balance grows to 100k one day and then I put my kid as a beneficiary how the tax reporting works?
I think changing the beneficiary to your kid would then use up some of your estate tax exemption.
Good info but in my mind 529 plans aren’t any more “for rich people” than 401(k)s or IRAs (rich people benefit more from tax-free income of any kind). I’d recommend a lower income person save in a 529 plan before opening a brokerage account for college savings. The 10% penalty reduces flexibility but it’s an incentive to keep the money saved and if you receive other tax-free educational support to cover your expenses it doesn’t apply so you can effectively withdraw that amount at regular tax rates. Plus with a 529 you have the flexibility of reporting any income on either the owner’s or the beneficiaries return by choosing who to write the check to.
The state income tax break can make a difference even for low and middle income earners. Also some states provide seed funding for eligible beneficiaries.
Low income folks don’t have to pay CG taxes anyway, but the main thing is low income folks don’t have the money to put in a 529 anyway.
What about superfunding as a way to reduce your net worth before a divorce in a community property state? Particularly when one spouse far out earns the other.
Let me think this through:
So you give money away so your net worth is lower so there is less to split.
I guess you could do that.
1) If 529 is in your kids name and not a part of your estate, why does gift tax exemption kicks in for the transferring it from your son to grandson?
2) Instead of changing the beneficiary to grandson is it better to transfer the ownership to my son (Like on death) and then have him change the beneficiary to his son?
3) If I am going to hit that 22 million mark or the estate limits go down in future, is it better to fund the 529s? even though they are not going to use it? as opposed to putting it in taxable?
4)
1. That’s generation skipping tax, slightly different.
2. I can’t imagine there is a loophole that large, but I don’t actually know the answer to your excellent question.
3. I guess, but at that level of wealth, you probably need a bigger solution to your estate tax problem.
White Coat Investor how crazy were my spouse and I to partially superfund 5 years ago (120k at birth)? We have an only child, and our doctor parents paid for private undergrad for us. We thought graduating debt free from undergrad was really a blessing that we’d like to replicate for our kiddo. I hope our kiddo chooses public school and has 529 money left over for graduate studies. Partially superfunding still seems like a good use of money to us since private undergrad room and board is now $75k+/year. We try to follow your advice to the letter and so have always maxed out all tax advantaged accounts including HSA, 457b. At the time of superfunding we felt reassured that we could take out the principle without penalty, and/or change the beneficiary to a grandchild.
I think you’re fine.
If spouse and I are each contributing $16k to our child’s 529 plan, can we just put in $32k into one plan, or do we have to each put $16k into two separate 529 plans for one child? I don’t want to have to bother with form 709.
I think you need two.
Thanks so much for this timely post, filling out my 709 now.
Seems like Part 2 line 1 and line 3 are both supposed to be $0 instead of $15k though?
Part 2 line 1 is derived from Schedule A, Part 4, line 11 which should also be $0 if I’m reading that section correctly.
As a non-tax professional, that’s my reading as well. Annual exclusions in Part 4, line 2 should equal the amount on part 4, line 1 (assuming the 529 superfunding is the only gift in play, and you superfunded no more than 5x the annual gift exclusion). That zeroes out taxable gifts for part 4, so the 0 goes to part 2 line 1.
Anyway, that’s how I’m filling out my own forms…we’ll see what the IRS says.
Thanks this is a good topic. It would be good to see a “how to” on the forms as an example. If I understood correctly the form you’re showing is just a normal 709 contribution, no superfunding, no multi year reporting example.
If the child does not end up using 529 , the principal amount – say 75,000 or 80,000 what we have contributed – can this is be withdrawn tax free and penalty free ?
Are only the gains taxed and 10% penalty is it only for the gains ?
Yes, only the gains for taxes and penalties.
Form 709 is a federal form. Is there any corresponding state form?
That’s a very state dependent question. Can you narrow it down a bit?
I’m a NJ resident and superfunded last year.
https://www.njbest.com/njbest/resources/libraryforms
I don’t see one there. Maybe it’s not required. Not sure. Might be worth calling these guys to ask:
https://www.state.nj.us/treasury/taxation/prntgit.shtml
Thanks for this article. Does anyone know if the super funding be done as multiple contributions throughout the year that total up to the limit? Or is it required to make a single contribution?
And if it’s allowed, is there any paperwork impact in contributing in that way, or do the forms get filled out in the same way using the overall total amount for the year?
Thanks!
All contributions in a given year are considered as one contribution when it comes to reporting them to the IRS. Same as with IRAs.
Great article. I have an aunt (Illinois resident) and am trying to encourage her to superfund a 529 plan for my 2 kids. She’s willing; I just want her to do it in the most tax efficient way for her. Am I right in thinking that she could fund 529 plans (one for each child) this year (2022) with 5 x $11 = $55K. i.e. total of $110K. This would allow her to take the $10K Illinois state income tax deduction this year. Then in 2023 and beyond she could fund them for $5K for each plan and take $10 Illinois state income tax deduction in those years as well?
I don’t know how whether Illinois allows you to carry forward unused deductions or not, but if not your plan seems reasonable.
This was a super useful post for me. Thanks for writing it up and answering the comments “White coat investor”
My situation is that I have just moved to the US and I have zero dollars in a 529 plan. I want to use the tax free gains in a 529 plan to fund my kids education. I want to superfund the 529 in one go because I think the market is at a low right now (July 2022) and it might be better to invest lump sum in a passive index now than partially over the next 5 years.
This post helps me understand how to do it and how to manage the gift tax issues. One concern I have, that remains unaddressed is that I have not added a beneficiary to my 529 plan because my son and daughter do not have an SSN or an ITIN right now. Curious what happens when I add them as beneficiaries AFTER I superfund the 529?
Am I better not funding until I get an ITIN for them?
Regards
–Anubhav
How much longer will it take? After a birth it only takes a few weeks to get a SSN. If that’s the case, I’d wait.
Great write-up!
However, under “How 529 Superfunding Works”, where you are showing a part of the IRS Form, you forgot to check Box B under Schedule A.
That’s the line that actually says you are electing to spread the gift over 5-years under Section 529.
Thanks!
“If you are married, you can put in $170,000 all at once (might need to use two separate 529s)”
Thanks for this article Dr Dahle. Informative as always! My wife and I are looking to boost our two children’s 529 accounts. They’re both early teens, and this year we are fortunate enough to have maxed out all retirement account options so it’s time to get the 529s significantly increased to try and help with the astronomical costs of college.
I understand we can do $80K/child by super funding five years since there’s a 2022 limit of 16K/year/child. So $160K total for two children total (I know you say $170K but that’s for 2023).
What I’m not clear about is your “might need to use two separate 529s” comment that I quoted above. We have one account per child so we would really be doing $80K per account. So I think that would be ok, and perhaps you’re just saying it’s maybe a bad idea to use one 529 account and somehow try to cover two beneficiaries?
I also wonder if you think it’s better to fill out the form 709 showing each parent giving $40K per child? Or better to show one parent giving $80K to one child, and the other parent giving $80K to the other child?
Thanks!
No, I’m saying you could open a 529 and put $80K in for the kid. Then your spouse could open another 529 and put $80K in for the same kid. That doesn’t exceed the gift amount limit for either of you. Whether you actually need to do that or not is a totally separate question, but you COULD do that if you really want to.
ok, so I think I got the math on the limits wrong as a first point. It is actually a superfund gift-exempt limit of $80K/child *per parent* so with two parents it can be $160K per child (side note, wow that’s a lot). With two kids it could be $320K total into 529s, from the two parents. Right?
With regards to the “COULD” do… taking your single kid example.. I think you’re saying one COULD do it that way, as opposed to just putting $160K all in one account. Assuming I got that right, I’m a bit surprised you suggest that might be needed – any reason or experience that tells you it’s needed? I hope it isn’t because we’ve also previously put $30K in one year (not super funded) into one account, on the assumption that the two parent amounts can go into a single account.
That’s right.
On your second question, you could be right. We’ve never tried that. We’ve never put more than the $16K limit in per kid in a year. I wonder if when you put more than that in you need to file the appropriate paperwork, but I don’t know you have to for sure.
Can you offer any suggestions for what to do with money that is left in a 529 after education is completed? Specifically, I am wondering what is the best way to transition it to retirement funds.
Thanks, T
Lucky you. They just passed a bill that will allow $35K of it to be rolled into the beneficiary’s IRA, at least once the 529 has been open for 15 years.
You can also just withdraw it, pay taxes and penalties, and spend it or reinvest it in retirement accounts or taxable.
Personally, I expect I’ll just change the beneficiaries to the next generation.
Question on using 529 funds for K-12 education. We are in TX – can we only use the funds at private schools accredited through the state (TEPSAC) or can we use them on ANY private K-12 school? As always, thanks for all you do here on WCI!
You can use it at any public, private, or religious K-12 SCHOOL for tuition only.
Now, how school is defined can be tricky. Most homeschooling, for instance, is done by a coop or tutorial, not an official school. That doesn’t count.
So when you say “ANY” what do you mean really? I couldn’t find anything about TEPSAC accreditation being required to use 529 money online, but there has to be a school and you have to pay it tuition.
Don’t you have to check Box B in Section A for the initial year you fill out the 709? Your example has it unchecked.
Yes, that box should be checked if one is superfunding a 529. Good catch.
Question – i have been seeing different answers to this question, but if you supercharge the 529 (and don’t make any other contribution over the next 5 years) do you need to complete the form 709 for each of the 5 years or just for the year immediately following the actual contribution
I think just once, but I confess I’ve never superfunded personally.
I’ve been hearing thst you can roll over 529 into a roth ira now. A 35k maximum. Does this mean one can potentially roll it to multiple Roth IRAs by changing beneficiary? And is there a penalty for that or you just pay the taxes?
I suppose so. No penalty. But it replaces their regular annual contributions. It’s not in addition to it. And they still need enough earned income to justify the contribution. So it’s not quite as cool as it sounds initially, but it’s a nice option.