How Does the Georgia 529 Plan Work and Can You Rollover to an ABLE Account?
Learn how the Georgia 529 plan supports education savings, its tax benefits, and how rollovers to an ABLE account work under current regulations.
Saving for education can be challenging, but Georgia’s 529 plan helps families set aside money for future expenses with tax advantages. These plans offer state tax benefits and flexibility, making them a popular choice for long-term educational savings.
Residency and Other Requirements
Georgia’s 529 plan, the Path2College 529 Plan, is available to both residents and non-residents. Georgia residents benefit from state tax deductions on contributions, but anyone can open an account.
The account owner can be a parent, grandparent, relative, or non-family member, with no income restrictions on contributors. The beneficiary—the student using the funds—does not need to be a Georgia resident.
Each account is tied to a single beneficiary, but the owner retains control over the funds. They can change the beneficiary to another qualifying family member if needed, which is useful if the original beneficiary does not attend college or receives a scholarship.
Funding and Contribution Limits
Georgia’s Path2College 529 Plan allows contributions up to $475,000 per beneficiary. Once this limit is reached, no further contributions can be made, though investment earnings can continue to grow. There is no state-imposed annual contribution limit, but federal gift tax rules apply.
In 2024, individuals can contribute up to $18,000 per year per beneficiary without triggering the federal gift tax, or $36,000 for married couples splitting gifts. A five-year front-loading option allows contributions up to $90,000 ($180,000 for couples) at once without exceeding the annual gift tax exclusion, provided no additional gifts are made to the beneficiary during that period.
Contributions are made with after-tax dollars, but earnings grow tax-free, and withdrawals remain tax-free when used for qualified education expenses. Investment options include age-based portfolios that adjust risk levels as the beneficiary nears college and static portfolios for those preferring a fixed allocation.
Qualified Education Uses
Funds in Georgia’s 529 plan can be used for tuition, fees, books, supplies, and equipment required for enrollment at eligible postsecondary institutions. Computers, software, and internet access also qualify if primarily used by the beneficiary.
Up to $10,000 per year can be used for K-12 tuition at private or religious schools. However, expenses like transportation, uniforms, and extracurricular fees do not qualify.
For college students enrolled at least half-time, room and board expenses are eligible, though limits apply. On-campus housing costs cannot exceed the school’s published cost of attendance, while off-campus housing expenses must align with the institution’s estimates. Families should keep receipts and confirm expenses with the school to avoid tax penalties.
State Tax Deductions
Georgia taxpayers contributing to the Path2College 529 Plan can deduct up to $4,000 per beneficiary on state income taxes if filing individually or $8,000 if filing jointly. These deductions apply only to contributions made during the tax year and do not carry forward.
Unlike states offering tax credits or matching contributions, Georgia’s deduction reduces taxable income rather than directly lowering tax liability. With Georgia’s 2024 flat income tax rate of 5.49%, the maximum tax savings per beneficiary is $219.60 for single filers and $439.20 for joint filers. While modest, long-term contributors can accumulate meaningful savings, especially with compounding investment growth.
Rollover to ABLE
Families saving for a beneficiary with a disability may transfer funds from a Georgia 529 plan into an ABLE (Achieving a Better Life Experience) account, which provides tax-advantaged savings for disability-related expenses. Federal law allows up to $18,000 in 2024 to be transferred annually without taxes or penalties, provided the beneficiary of both accounts is the same person or a qualifying family member.
ABLE accounts cover a broader range of expenses, including housing, healthcare, and assistive technology. Georgia’s ABLE accounts have a total contribution limit of $235,000, and balances exceeding $100,000 may affect Supplemental Security Income (SSI) eligibility. Since rollovers count toward the annual ABLE contribution limit, families should plan transfers carefully to avoid exceeding allowable amounts and unintentionally reducing other benefits.
Penalties for Nonqualified Spending
Using 529 funds for nonqualified expenses results in financial penalties. The earnings portion of the withdrawal is subject to federal income tax and a 10% penalty. Additionally, Georgia may recapture previously claimed state tax deductions.
Exceptions exist for cases such as when the beneficiary receives a scholarship, attends a U.S. military academy, or passes away. In these cases, the 10% penalty is waived, though income tax on earnings still applies. To avoid penalties, account owners should maintain detailed records of withdrawals and expenses to ensure compliance with IRS guidelines.
Changing Beneficiaries
If the original beneficiary no longer needs the funds, 529 plans allow for a tax-free transfer to another qualifying family member. Eligible recipients include siblings, parents, children, cousins, and in-laws, as long as they meet IRS-defined relationships.
For families with multiple children, reallocating funds can help optimize savings, especially if one child receives scholarships or chooses a less expensive education path. If no suitable beneficiary exists, account owners may consider rolling funds into a Roth IRA under recent federal provisions, provided the account has been open for at least 15 years and meets contribution limits. This option allows for long-term tax-free growth while repurposing unused education savings.