How Many 529 College Savings Plans Can You Have?

A 529 college savings plan is a tax-advantaged savings vehicle designed to help individuals save for future education costs. These plans are sponsored by states or educational institutions, offering a beneficial way to accumulate funds for qualified educational expenses. Earnings within a 529 plan grow free from federal taxes, and withdrawals are also tax-free when used for eligible expenses. This includes tuition, fees, books, supplies, equipment, and even room and board for eligible students.

Understanding Multiple 529 Plans

There is no federal restriction on the number of 529 plans an individual can own or be a beneficiary of. While federal law does not limit the quantity of plans, state programs may establish their own specific rules.

Individuals often open multiple 529 plans for various reasons. These include investing in different state programs to access varying tax benefits or a broader range of investment options. Another reason is to establish separate accounts for different beneficiaries, such as one for each child, ensuring dedicated savings. Diversifying investment strategies across different plan providers or options is also a consideration. Multiple plans can also be part of gift tax planning, particularly for those looking to front-load contributions.

While the number of plans is not federally capped, the total amount of money that can be contributed and held within these plans is subject to certain limits.

Contribution and Aggregate Limits

Contributions to 529 plans are considered gifts under federal tax law and are subject to the annual gift tax exclusion. For 2024, an individual can contribute up to $18,000 per beneficiary without incurring federal gift tax implications. Married couples filing jointly can contribute up to $36,000 per beneficiary in 2024. If contributions exceed this annual exclusion, the excess amount will count against the donor’s lifetime gift tax exemption.

A special provision, known as the five-year gift tax election or “superfunding,” allows a donor to contribute a lump sum of up to five times the annual gift tax exclusion amount in a single year. This means an individual can contribute up to $90,000 in 2024 (or $95,000 in 2025) to a beneficiary’s 529 plan, treating the contribution as if it were made over a five-year period. This strategy requires the donor to file IRS Form 709, and no additional gifts can be made to that beneficiary for the subsequent four years without affecting the lifetime gift tax exclusion. These gift tax rules apply per beneficiary, regardless of how many 529 plans they have.

Beyond federal gift tax considerations, each state’s 529 program also imposes an aggregate maximum balance limit for a single beneficiary. These limits typically range from approximately $235,000 to over $590,000, varying significantly by state. Once the total account balance for a specific beneficiary, including contributions and investment earnings, reaches this state-specific threshold within that state’s program, no further contributions can be made to any 529 plan sponsored by that particular state for that beneficiary. However, reaching a state’s aggregate limit does not prevent an individual from opening another 529 plan for the same beneficiary in a different state, allowing for continued contributions, subject to the federal gift tax rules.

Managing Multiple Accounts

Owning multiple 529 plans requires careful organization to ensure compliance and maximize benefits. Maintaining detailed records for all contributions, distributions, and account balances across every plan is important, especially for tax purposes and to monitor against state-specific aggregate limits.

The existence of multiple 529 plans for a dependent student can influence financial aid calculations. Generally, all 529 plans owned by a parent for a dependent student are aggregated and reported as parental assets on the Free Application for Federal Student Aid (FAFSA). These parental assets are assessed at a relatively low rate, with a maximum of 5.64% of their value typically factored into the Student Aid Index (SAI). For the 2024-2025 academic year, distributions from 529 plans owned by grandparents or other relatives are no longer counted as student income on the FAFSA.

Funds held in a 529 plan can generally be rolled over to another 529 plan without tax consequences. This rollover can occur from one state’s program to another, or between plans within the same state, for the same beneficiary. Such tax-free rollovers are permitted once every 12 months for the same beneficiary. Additionally, the beneficiary of a 529 plan can be changed to another eligible family member without incurring tax penalties. This flexibility can be useful if the original beneficiary receives scholarships, decides not to attend college, or if there are other changes in educational plans.