Question

a contribution to a qualified tuition plan (a code 529 plan)is treated as a gift of a:

Answer 1

A contribution to a 529 plan is treated like a gift from the owner of the Plan to the Beneficiary. The gift tax exclusion may be adjusted by the IRS annually. If the amount put in to the 529 Plan exceeds the annual exclusion for a given year, the excess amount can be applied against the annual exclusion ratably over 5 years. This functions like a carryover, and an election has to be made. In any tax year that an amount is carried over, the total annual exclusion, including the carried over amount, cannot exceed the annual exclusion limit. If no other gifts are given to the beneficiary, the total amount that can be placed into a 529 Plan and qualify for the annual gift tax exclusion over 5 years is $65,000. The owner will need to file a gift tax return and use part of their lifetime exemption if the contributions exceed the annual gift tax exclusion.