Is 15,000 new gift tax limit=Higher 529 contribution?

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Jimsad
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Is 15,000 new gift tax limit=Higher 529 contribution?

Post by Jimsad » Sun Nov 05, 2017 2:46 pm

Hi everybody ,
Can someone verify if annual gift tax exclusion increased to 15,000 for 2018?
Does this mean 529 contribution limits per child for 2018 are 30,000 ( 15k from each parent )?

NightFall
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Re: Is 15,000 new gift tax limit=Higher 529 contribution?

Post by NightFall » Sun Nov 05, 2017 3:17 pm

https://www.irs.gov/pub/irs-drop/rp-17-58.pdf

Page 20 indicates that the annual exclusion for gifts is $15,000 for 2018. I don't have a definitive answer on the 529 question, but my understanding is that the limitation is based on the gift exclusion amounts. That would mean that the 5 year election would be up to $150,000 per married couple.

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Jimsad
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Re: Is 15,000 new gift tax limit=Higher 529 contribution?

Post by Jimsad » Sun Nov 05, 2017 4:00 pm

Thanks for your reply.
I always assumed that the 529 contribution limit was based in the gift tax exclusion amount .
The 150,000 over 5 years limit seems to support that .
Should I be calling Vanguard where I have the 529 account to see if they can verify this?

Does anyone have any other thoughts ?

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HueyLD
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Re: Is 15,000 new gift tax limit=Higher 529 contribution?

Post by HueyLD » Sun Nov 05, 2017 4:12 pm

Unlike IRAs or 401(k)s, there are no annual contribution limits for 529 plans. However, there are maximum aggregate limits, which vary by plan. Under federal law, 529 plan balances cannot exceed the expected cost of the beneficiary's qualified higher educatiributionon expenses. Limits vary by state, ranging from $235,000 to $520,000. This amount represents what the state believes to be the full cost of attending an expensive school and graduate school, including textbooks and room and board. If your plan is close to the limit don't worry about future earnings in the account pushing it over. The funds can remain in the account without penalty, but the family will not be able to make any future contributions unless a market drop brings the account balance back down.
http://www.savingforcollege.com/article ... an-in-2017

Many people limit their contributions to the annual gift tax exclusion amount ($15k for 2018) so that they don't have to file gift tax returns. But you can give more as long as you don't mind filing tax returns.

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CollegePrudens
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Re: Is 15,000 new gift tax limit=Higher 529 contribution?

Post by CollegePrudens » Sun Nov 05, 2017 7:52 pm

Jimsad wrote:
Sun Nov 05, 2017 4:00 pm
Does anyone have any other thoughts ?
The 2017 version of the limits are discussed at 529 plan - Bogleheads

For a married couple if you go above 2 x yearly exclusion, you will have to file IRS Form 709.
We need to learn to want what we have, not to have what we want, in order to get stable and steady happiness - The 14th Dalai Lama

staythecourse
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Re: Is 15,000 new gift tax limit=Higher 529 contribution?

Post by staythecourse » Sun Nov 05, 2017 8:14 pm

HueyLD wrote:
Sun Nov 05, 2017 4:12 pm

Many people limit their contributions to the annual gift tax exclusion amount ($15k for 2018) so that they don't have to file gift tax returns. But you can give more as long as you don't mind filing tax returns.
I am thinking that is correct. There is NO limit to how much one can contribute to a 529 plan as long as it is under the TOTAL limit imposed by the plan itself.

One usually stops at the annual gift tax just so they don't have to keep the documentation of how it will impact their LIFETIME gift tax exemption on the amount over the annual limit.

I would think this is not an issue for most folks. For a mom and dad family with 2 kids that is a total of 60k POST taxes that can be saved with the new exemption so don't think most folks are trying to save more then that just for 529/ year on top of paying the bills, buying stuff for themselves and family during the year, and saving for their own retirement.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

informal guide
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Re: Is 15,000 new gift tax limit=Higher 529 contribution?

Post by informal guide » Sun Nov 05, 2017 8:43 pm

In addition, if my memory is correct, those in PA will get a higher 529 plan contribution deduction from their PA State income tax return in 2018 - - it is indexed tot he gift the exclusion amount and, fortunately still applies to contributions to any 529 plan. If the 2018 gift tax exclusion indeed rises to $15,000, the PA 529 plan deduction rises also, so long as one has taxable income of at least that amount.

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