Can You Have More Than One 529 Account?
Uncover the rules and strategies for handling multiple 529 education savings accounts efficiently, covering financial implications and practical considerations.
A 529 plan is a tax-advantaged investment vehicle designed to help individuals save for qualified education expenses. Contributions grow free from federal income tax, and withdrawals are tax-free when used for eligible costs like tuition, fees, books, and room and board. Qualified expenses now include K-12 tuition, apprenticeship programs, and student loan repayments. Many consider establishing multiple accounts to maximize this savings tool.
Establishing Multiple 529 Accounts
Individuals can establish multiple 529 accounts, as there are no federal restrictions on the total number. This flexibility allows for creating multiple accounts for the same beneficiary, such as opening separate plans in different states or utilizing different investment options within the same plan. Families often open separate accounts for different beneficiaries, like parents for their children or grandparents for their grandchildren. While opening two plans of the same type in the same state for the same beneficiary is generally not possible, using different state plans is an option. This approach can diversify investment managers or maximize total savings across state-specific contribution limits.
Understanding Contribution Limitations and Gift Tax Rules
Specific financial rules govern contributions to 529 accounts. Each state’s plan sets a lifetime contribution limit per beneficiary, applying across all accounts regardless of ownership or location. These limits typically range from $235,000 to over $575,000. Contributions are considered gifts for federal tax purposes.
For 2025, the annual federal gift tax exclusion allows an individual to contribute up to $19,000 per beneficiary without triggering gift tax reporting. Married couples filing jointly can contribute up to $38,000. A “superfunding” provision allows contributing up to five years’ worth of the annual exclusion at once. In 2025, this means an individual can contribute up to $95,000, or a married couple up to $190,000, for a single beneficiary in one year.
This requires filing IRS Form 709 and making no further gifts to that beneficiary for the next four years. Contributions exceeding the annual exclusion, even with superfunding, reduce the donor’s lifetime gift tax exemption, which is $13.99 million per individual in 2025.
Financial Aid Implications of Multiple Accounts
Multiple 529 accounts can influence financial aid eligibility, primarily through the Free Application for Federal Student Aid (FAFSA). For dependent students, 529 plans owned by a custodial parent are considered parental assets, assessed at a maximum of 5.64% of their value. If a student has multiple 529 accounts owned by a custodial parent, their total value is aggregated for financial aid calculations.
A notable change with the simplified FAFSA, starting with the 2024-2025 academic year, affects accounts owned by non-parents. Distributions from 529 plans owned by grandparents or other non-parents are no longer reported as untaxed student income on the FAFSA. This change means these withdrawals will not negatively impact federal need-based financial aid eligibility. However, some private colleges use the College Scholarship Service (CSS) Profile, which may still consider grandparent-owned 529 plans for institutional aid.
Managing Multiple 529 Accounts
Managing multiple 529 accounts requires attention to administrative details and strategic planning. Maintaining records of all contributions and withdrawals is important for tax reporting and tracking progress. Coordinating investment strategies across different plans or managers is also a consideration, especially if accounts are held in various state plans.
When paying for education expenses, managing withdrawals involves tracking qualified expenses to ensure distributions remain tax-free. Account owners can strategically withdraw from accounts with higher growth first to maximize tax benefits. While the IRS has not provided specific guidance on allocating the $10,000 annual maximum for K-12 tuition withdrawals across multiple 529 accounts, the total amount withdrawn for such expenses must not exceed the limit.