529 plans are not only a great estate-planning tool way to save for your children or grandchildren’s’ college tuition, but they have another added bonus too. Under this new tax law, individuals can make a lump-sum 2021 gift of up to $75,000 to fund a 529 college savings account for a child or grandchild and claim a federal gift tax exclusion for the full amount.
“This accounts for five years’ worth of the standard $15,000 annual exclusion that normally applies to 2021 gifts,” according to the IRS. We have found that many people are not aware of this tax break and how they can benefit from this, which is why it’s important to share the knowledge.
Another interesting point to note is that the Tax Cuts and Jobs Act of 2017 now applies to tuition for grade K-12, which is useful for those who decide to send their children to private school.
It’s important to note that grandparents can really benefit from contributing to a 529 plan, as it removes assets from taxable estates in large sums and the money is invested to grow and earn income tax-free. If you are currently contributing to a 529 plan or are considering opening one, we are happy to discuss your situation and more of the benefits involved. If you have any questions or would like to discuss these plans, please feel free to contact us at firstname.lastname@example.org or schedule a 30-minute complimentary meeting here.