Key Takeaways
- You can gift $19,000 per child to a 529 in 2026 and $20,000 in 2027.
- Superfunding five years at once allows $95,000 in 2026, rising to $100,000 in 2027.
- Up to $35,000 of leftover 529 money can roll into the beneficiary's Roth IRA over time.
- The tax and 10% penalty on a non-qualified withdrawal hit only the earnings portion.
You can put $19,000 into a child’s 529 plan in 2026 without touching your gift tax exemption, or $38,000 as a married couple. On January 1, 2027, that rises to $20,000 ($40,000 for a couple), per the Internal Revenue Service (IRS) inflation notice, Rev. Proc. 2026-35.
Superfunding, five years of gifts at once, goes from $95,000 to $100,000 per child ($200,000 for a couple). So if you’re thinking about a lump sum this winter, the date you send it matters.
| 2026 | 2027 | |
|---|---|---|
| Annual gift per child, one giver | $19,000 | $20,000 |
| Annual gift per child, married couple | $38,000 | $40,000 |
| 5-year superfund, one giver | $95,000 | $100,000 |
| 5-year superfund, married couple | $190,000 | $200,000 |
These are federal gift tax numbers, not 529 limits. A 529 plan itself only caps the lifetime balance per child, set by each state (more on that below).
December or January? Timing a Big 529 Gift
A gift counts in the year the plan receives it. Money that lands by December 31 uses the 2026 numbers; a contribution in January uses 2027’s.
For a regular yearly gift, doing both is the easy win. A grandparent can send $19,000 in December and $20,000 in January, and the child’s account gets $39,000 in about a month, all within the exclusions.
For a superfund, January gets you $5,000 more room ($10,000 for a couple). There’s a wrinkle most people miss.
If you superfunded $95,000 in 2026 and the exclusion later rises, you can gift the difference in each year of the five-year window. That’s an extra $1,000 for 2027, no new five-year election needed.
Either way, superfunding is an election you make on IRS Form 709, filed by April 15 of the next year. Each spouse files their own.
The Two Kinds of 529 Plans
A 529 college savings plan is the common one. You invest in mutual funds or age-based portfolios, growth is tax-free, and withdrawals for qualified costs at any accredited school nationwide come out tax-free too. Your balance can drop in a bad market.
A 529 prepaid tuition plan locks in today’s tuition at participating public colleges, usually in your own state. Most cover tuition only, not room and board.
I first wrote about choosing a 529 for my son years ago. The savings plan is still the one most families pick, because you don’t have to guess where your kid will go.
What OBBBA Changed for K-12 and Job Training
The One Big Beautiful Bill Act (OBBBA) made three changes families are already using.
- K-12 withdrawals doubled. Up to $20,000 a year can come out tax-free for K-12 costs, starting in 2026. It was $10,000.
- K-12 covers more than tuition. Curriculum materials, books, tutoring from a qualified provider, SAT, ACT and AP exam fees, dual-enrollment costs, and occupational, speech or behavioral therapy for kids with disabilities.
- Credentials count. Tuition, fees and exam costs for state-licensed certifications, apprenticeships and recognized workforce credential programs are now qualified expenses.
The rest of the law’s tax changes are in my OBBBA guide.
What a Non-Qualified Withdrawal Really Costs
Only the earnings get taxed and penalized. You already paid tax on what you put in, so your contributions come back clean.
Say you pull out $50,000 that’s $30,000 contributions and $20,000 growth. Income tax and the 10% penalty apply to the $20,000. That’s it.
A scholarship softens it further. You can withdraw up to the scholarship amount without the 10% penalty, though the earnings part is still taxed. The same exception generally covers other tax-free help, like certain veterans’ education benefits.
Get the 2027 Roth IRA limit for 529 rollovers by email
The IRS hasn’t set next year’s IRA limit yet, and it caps how much of a leftover 529 can move to a Roth. I’ll post it the day it’s out.
Free. You’ll get my new posts, including these updates. Unsubscribe anytime, and check your spam folder for the confirmation email.
Rolling Leftover 529 Money Into a Roth IRA
This is the change I get the most questions about. It answers the big worry: what if my kid gets a scholarship, skips college or doesn’t use it all?
Under SECURE 2.0, up to $35,000 over a lifetime can move from a 529 into the beneficiary’s own Roth IRA, tax- and penalty-free. The conditions:
- The 529 has been open at least 15 years.
- Contributions from the last 5 years, and their earnings, can’t move.
- Each year’s rollover is capped at that year’s Roth IRA limit: $7,500 for 2026. The 2027 limit comes in the IRS retirement notice, expected this month.
- The beneficiary needs earned income at least equal to the rollover.
One detail trips people up. The usual Roth income phase-outs don’t apply, so a high-earning grad can still take the rollover.
At $7,500 a year, the full $35,000 takes five years. It’s a release valve for oversaving, not a second retirement plan.
Example: Elena’s grandparents opened a 529 for her in 2010. She finished school with $22,000 left and now earns $48,000. She can roll $7,500 for 2026, then roughly the same in each of the next two years.
The account is well past 15 years, and the newest money stays behind until it’s 5 years old.
State Tax Deductions Still Vary Widely
About 40 states give a deduction or credit for 529 contributions. The amounts run from $500 a year to unlimited. California, Delaware and Hawaii offer nothing, whichever plan you use.
Nine states let you deduct contributions to any state’s plan (marked with an asterisk). Most only reward their own plan. Every state also caps the lifetime balance per child, generally $235,000 to over $600,000.
| State | State Tax Benefit (Single / Joint) | Aggregate Lifetime Limit |
|---|---|---|
| Alabama | $5,000 / $10,000 | $475,000 |
| Alaska | No state income tax | $550,000 |
| Arizona* | $2,000 / $4,000 | $590,000 |
| Arkansas* | $5,000 / $10,000 | $500,000 |
| California | None | $529,000 |
| Colorado | $25,400 / $38,100 | $500,000 |
| Georgia | $4,000 / $8,000 | $235,000 |
| Illinois | $10,000 / $20,000 | $500,000 |
| Kansas* | $3,000 / $6,000 | $501,000 |
| New Jersey | $10,000 / $10,000 (income capped at $200,000) | $305,000 |
| New Mexico | Unlimited | $500,000 |
| New York | $5,000 / $10,000 | $520,000 |
| Ohio* | $4,000 / $4,000 (unlimited carryforward) | $541,000 |
| Pennsylvania* | $19,000 / $38,000 (follows the federal gift exclusion) | $511,758 |
| South Carolina | Unlimited | $575,000 |
| Texas | No state income tax | $500,000 |
| Virginia | $4,000 / $4,000 (no limit age 70+) | $550,000 |
| West Virginia | Unlimited | $550,000 |
\*Allows the deduction for contributions to any state’s 529 plan, not just the in-state one.
These are the states I get asked about most. Pennsylvania’s deduction follows the federal exclusion, so it should reach $20,000 per child for 2027. Legislatures change these figures, so check savingforcollege.com’s state-by-state table for every state’s current number.
New Jersey surprises people. It added a deduction in 2022: up to $10,000 a year for the in-state NJBEST plan if your gross income is $200,000 or less.
Picking a Plan
Start with your own state’s plan if your state gives a deduction, since most require it. If your state gives nothing, shop on fees and fund choices instead.
Fees matter more than the tax break over 18 years. Some plans charge sales loads of several percent plus yearly admin fees, and that can wipe out a state deduction.
And don’t stretch the budget for a deduction. A steady $200 a month beats a big contribution you can’t keep up. Whether college money should come before your own 401(k) is its own question; I explain my take in 529 vs. retirement savings.
529 Mistakes I See Every Year
Doing two IRA moves in one year. The 529-to-Roth rollover and the beneficiary’s own IRA contributions share one annual limit. A grad who already put $3,000 in a Roth can only roll $4,500 for 2026.
Treating superfunding as a casual check. A missing Form 709, or extra gifts during the five years beyond the inflation bump, pulls in the gift tax reporting you were avoiding.
And if the giver dies within the five years, part of the gift goes back into their estate. See my estate and gift tax guide for how the lifetime exemption fits in.
Assuming unused money is wasted. Between the credential expansion, the Roth rollover and a beneficiary change to a sibling or cousin, leftover money has real options now.
Missing a newborn’s free $1,000. A child born in 2025 or later can also get a Trump Account with a $1,000 federal deposit. It’s not a 529 substitute; my Trump Accounts guide compares the two.
What I’m Watching for 2028
The 2028 gift exclusion comes in the IRS inflation notice next fall. It moves in $1,000 steps and only when inflation pushes it past the next one, so after this year’s jump I’d expect $20,000 again or $21,000. That’s my read, not a projection from the IRS.
I’m also watching how many families use the Roth rollover as more accounts pass the 15-year mark. And states keep adjusting their deduction caps after OBBBA; Pennsylvania’s moves automatically.
For aid, scholarships and other ways to cover the bill, see my guide to paying for college.
