529 plans in 2026: $19,000 a year in, up to $35,000 out to a Roth
The 2026 gift exclusion is $19,000, the K-12 cap is $20,000 and the 529-to-Roth limit is $35,000. The state deduction runs from zero to $76,000 a year.
- What happened
- For tax year 2026 the IRS annual gift exclusion stays at $19,000 per giver per recipient (Revenue Procedure 2025-32, released October 9, 2025). The 529 K-12 withdrawal cap rose to $20,000 a year for expenses after December 31, 2025, and the lifetime 529-to-Roth IRA rollover limit is $35,000 (IRS Topic 313, reviewed September 24, 2026).
- Why
- A 529 has no federal contribution limit of its own; the binding numbers are the gift tax exclusion, the five-year election, and the caps on what can come out tax-free. The state deduction is a separate layer set by each state.
- The numbers that matter
- $19,000Annual gift exclusion, tax year 2026 (IRS, Oct 9, 2025)$95,000Five-year election, 5 × $19,000 (calculation)$35,000Lifetime 529-to-Roth IRA rollover cap (IRS Topic 313)$20,000K-12 expenses per beneficiary per year after Dec 31, 2025
- Why it matters
- A couple can put $38,000 into one child's plan in a calendar year without a gift tax return, or $190,000 at once with the five-year election. Whether the state gives anything back depends entirely on where the giver files.
- What happens nextas we saw it on 13 Oct 2026
- The IRS usually publishes the following year's inflation adjustments in October; the 2026 figures were released on October 9, 2025. The 2027 figures depend on the September 2026 CPI, scheduled for release on October 14, 2026.
None of these is a contribution limit on the account itself; each is a limit on the gift tax, on a withdrawal, or on the Roth exit.
| Five-year gift election, one giver | 95000 |
|---|---|
| Lifetime 529-to-Roth rollover | 35000 |
| K-12 expenses per year | 20000 |
| Annual gift exclusion, one giver | 19000 |
| Student loan repayment, lifetime | 10000 |
| IRA contribution limit, under 50 | 7500 |
A 529 plan has no federal limit on how much you can put in. That surprises people who have read that “the 529 limit is $19,000”. The $19,000 is the gift tax annual exclusion, a number that governs every gift you make to anyone, and the IRS confirmed on October 9, 2025 that it stays at $19,000 for tax year 2026. The plan itself only has a ceiling set by the state that runs it, and the IRS says contributions cannot exceed what the beneficiary's education could plausibly cost.
The limits that bind are on the way out: what counts as a qualified expense, how much K-12 money the plan may pay, and how much can leave for a Roth IRA. The state tax deduction is a separate layer that ranges from nothing to tens of thousands of dollars a year. This piece sets out the figures as they stand on the agencies' own pages on October 12, 2026.
Going in: $19,000, or $95,000 at once
The IRS release IR-2025-103, dated October 9, 2025, states: “For tax year 2026, the annual exclusion for gifts remains at $19,000.” The detail is in Revenue Procedure 2025-32. The same release puts the estate basic exclusion amount for people who die in 2026 at $15,000,000.
The exclusion is per giver and per recipient. Two parents can each give $19,000 to the same child's plan, and each can also give $19,000 to a second child's plan, without any of it counting against the lifetime exclusion or requiring a gift tax return. Grandparents are separate givers again.
The IRS Instructions for Form 709 (2025 edition) describe the election on Schedule A, line B: a person who contributed more than $19,000 to a qualified tuition plan for one beneficiary “may elect to treat up to $95,000 of the contribution for that person” “as if you had made it ratably over a 5-year period.” The election is made by checking the box on line B, must be made for the calendar year of the contribution, and requires an explanation listing the total contributed, the amount the election covers and the beneficiary's name. The $95,000 figure is the 2025 one; because the 2026 exclusion is unchanged, the arithmetic is the same.
Five-year election, one giver: 5 × $19,000 = $95,000. Two spouses electing separately: 2 × $95,000 = $190,000. The catch is that the five annual exclusions for that child are then used up through 2030; any further gift to the same child in those years would eat into the lifetime exclusion and require a Form 709.
Coming out: what is a qualified expense in 2026
IRS Topic 313, last reviewed on September 24, 2026, is the current federal description of the plan. Earnings are not taxed while they sit in the account, and a withdrawal is tax-free when it is used for qualified education expenses. Four categories carry explicit dollar caps or conditions.
| Expense | Federal treatment | Limit |
|---|---|---|
| Postsecondary tuition, fees, books, equipment | Qualified at any institution eligible for federal student aid | No dollar cap |
| Room and board | Qualified if within the school's cost-of-attendance allowance, or the actual amount the school invoices if greater | Allowance or invoice |
| K-12 tuition, curriculum, books, tutoring, test fees, dual enrollment, educational therapies | Qualified for expenses after Dec 31, 2025 | $20,000 per beneficiary per year across all plans ($10,000 before Dec 31, 2025) |
| Apprenticeship fees, books, supplies, equipment | Qualified for registered programs | No dollar cap |
| Student loan principal and interest, beneficiary or sibling | Qualified | $10,000 lifetime per individual |
| Rollover to the beneficiary's Roth IRA | Not a distribution if conditions met | $35,000 lifetime; annual IRA limit applies |
Topic 313 states that qualified elementary and secondary expenses “are limited up to a total amount of $20,000 per year ($10,000 limit before Dec. 31, 2025)” per beneficiary across all of that beneficiary's plans. The list of what counts also widened beyond tuition to curriculum materials, books, tutoring outside the home, standardized and admissions test fees, dual-enrollment fees and educational therapies for students with disabilities. The IRS's older “529 plans: questions and answers” page, last reviewed January 30, 2026, still describes a $10,000 tuition-only cap and has not been updated to match.
Each program that paid you sends a Form 1099-Q showing the gross distribution in box 1, split into earnings (box 2) and basis, your own contributions back (box 3). The basis is never taxed. IRS Technical Guide 44 states that on a nonqualified withdrawal “the taxable earnings are also subject to an additional 10% tax imposed by Section 529(c)(6)”, with exceptions for the beneficiary's death or disability and for amounts matching a scholarship.
Assume the account is 60% basis and 40% earnings, and the owner's marginal federal rate is 22%. These are assumptions, not figures from any agency. Earnings portion: $10,000 × 40% = $4,000. Income tax: $4,000 × 22% = $880. Additional tax: $4,000 × 10% = $400. Total federal cost: $1,280, or 12.8% of the withdrawal. The $6,000 of basis comes back untouched. A state that gave a deduction on the way in may also claw it back, as New York's addition modification A-103 does.
Changing the beneficiary is not a withdrawal. Topic 313 and the Technical Guide both say a change to a “member of the family” of the former beneficiary, which includes siblings, children, parents, first cousins, nieces and nephews and in-laws, has no tax consequence. That is the ordinary route for money a first child does not use.
The Roth exit: $35,000, fifteen years, and a five-year look-back
The rule that changed the 529's reputation is the rollover to a Roth IRA, available for distributions after December 31, 2023. It means money saved for a child who ends up with a scholarship, or who does not go to college, has a tax-free exit that does not involve the 10% charge. The conditions are tighter than the headline suggests.
First, the transfer must be a direct trustee-to-trustee transfer into a Roth IRA owned by the 529's beneficiary. Second, it “is subject to the Roth IRA annual contribution limit and a $35,000 lifetime limit”. Third, the money “must be distributed from a QTP account that has been open for at least 15 years” as of the distribution date. Fourth, the rollover “may not exceed the amount contributed to the QTP (and attributable earnings) before the 5 year period” ending on the distribution date.
IRS release IR-2025-111 of November 13, 2025: “The limit on annual contributions to an IRA is increased to $7,500 from $7,000.” The same release puts the 2026 Roth income phase-out at $153,000 to $168,000 for single filers and $242,000 to $252,000 for married couples filing jointly. Topic 313 says the rollover is subject to the annual contribution limit; it does not say whether the income phase-out applies.
At the 2026 limit of $7,500 a year, $35,000 ÷ $7,500 = 4.67, so the full lifetime amount takes five separate tax years: four years at $7,500 ($30,000) and a fifth at $5,000. The rollover uses the beneficiary's IRA room, so a beneficiary who also contributes to an IRA from wages that year has less room for the 529 money. If the limit rises with inflation in later years, the schedule shortens.
The fifteen-year clock runs from when the account was opened, not from each contribution. The five-year look-back excludes recent contributions and their growth, which rules out opening an account at 18 and funding it for a quick Roth. The exit is a feature for long-held accounts, not a loophole.
The state layer: three examples from the states' own pages
Contributions are not deductible on the federal return; Topic 313 says so directly. Whatever deduction exists is state income tax, and the three states below show how differently it is done. All three figures were read on each state's own tax or treasury page on October 12, 2026.
| State | Form of relief | Cap | Source |
|---|---|---|---|
| New York | Subtraction from income, own state plan only, account owners | $5,000 single; $10,000 married filing jointly | NYS Tax Dept, Form IT-225 instructions, tax year 2025, subtraction S-103 |
| Pennsylvania | Deduction equal to the federal annual gift exclusion, per beneficiary, per taxpayer | $19,000 per beneficiary per taxpayer (2025 Schedule O) | PA Dept of Revenue, PIT Guide and 2025 PA-40 Schedule O |
| Indiana | Tax credit of 20% of contributions | $1,500 a year ($750 married filing separately) | Indiana Treasurer of State, Indiana529 tax credit page |
The New York State Department of Taxation and Finance's instructions for Form IT-225 (tax year 2025) describe subtraction S-103 for contributions by an account owner to “New York's 529 college savings program”: “up to $5,000 for an individual, head of household, qualifying surviving spouse, or married taxpayers filing separately” or “up to $10,000 for married taxpayers filing a joint return”. The same instructions carry addition modification A-103, which adds back deducted amounts when a nonqualified withdrawal is made.
The Pennsylvania Department of Revenue's Personal Income Tax Guide says the state “allows a maximum yearly deduction” “equal to the annual federal gift tax exclusion (found at IRC § 2503(b)) per beneficiary, per taxpayer.” The 2025 PA-40 Schedule O instructions put the number at $19,000 per beneficiary in each of the taxpayer's and spouse's columns.
Pennsylvania: 2 spouses × 2 beneficiaries × $19,000 = $76,000 deductible in one year. New York, same family: $10,000, regardless of the number of children. Indiana: the 20% credit is capped at $1,500, so 20% × $7,500 = $1,500; contributions above $7,500 a year earn no additional credit. The value of each depends on the state's tax rate, which this piece does not quote.
The federal numbers reward front-loading; a $95,000 election gets the money compounding at once. The New York rule rewards spreading: $10,000 a year for ten years attracts ten years of subtractions, while $100,000 in one year attracts one. Pennsylvania's per-beneficiary, per-spouse design is the one state structure that lines up with the federal exclusion. Where the giver files is therefore the first fact to establish.
What it means for your money
The 529's federal mechanics are simple once the three numbers are separated. The $19,000 is a gift tax reporting line, not a plan limit; a couple clears $38,000 a year per child without filing anything. The $20,000 K-12 cap and the $10,000 loan cap are on withdrawals, and both apply per beneficiary. The $35,000 Roth cap is a lifetime exit that needs a fifteen-year-old account and at least five tax years to use in full at the 2026 IRA limit.
- Money that is not used is not lost. The beneficiary can be changed to a family member at no tax cost, and the Roth route exists for long-held accounts.
- A nonqualified withdrawal costs income tax plus 10% on the earnings portion only. The basis always comes back untaxed. On the illustration above that is 12.8% of a withdrawal that is 40% earnings.
- State treatment ranges from zero to $76,000 of deductions for a four-person family in a single year. The state's own tax instructions, not the plan's marketing page, are where the current cap is printed.
- Fees and investment returns inside the plan matter more over eighteen years than any of these tax figures; see expense ratios and compound growth.
The 2027 federal figures depend on the September 2026 CPI, which the Bureau of Labor Statistics has scheduled for October 14, 2026; the 2026 figures came out on October 9, 2025. The site's calendar lists the release. The 2026 retirement limits piece covers the IRA figures the Roth rollover depends on.
Sources
- Schedule of release dates for principal economic indicatorsU.S. Bureau of Labor Statistics · 2026 · Primary source
- IRS releases tax inflation adjustments for tax year 2026, including amendments from the One Big Beautiful Bill (IR-2025-103)Internal Revenue Service · Oct 12, 2026 · Primary source
- Topic No. 313, Qualified Tuition Programs (QTPs)Internal Revenue Service · Oct 12, 2026 · Primary source
- 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500 (IR-2025-111)Internal Revenue Service · Oct 12, 2026 · Primary source
- Instructions for Form 709 (2025), United States Gift (and Generation-Skipping Transfer) Tax ReturnInternal Revenue Service · Oct 12, 2026 · Primary source
- 529 plans: Questions and answersInternal Revenue Service · Oct 12, 2026 · Primary source
- Publication 5834, Technical Guide 44, Qualified Tuition Program (IRC Section 529), Rev. 2-2024Internal Revenue Service · Oct 12, 2026 · Primary source
- Instructions for Form IT-225, New York State Modifications (tax year 2025)New York State Department of Taxation and Finance · Oct 12, 2026 · Primary source
- PA Personal Income Tax Guide, Deductions and CreditsPennsylvania Department of Revenue · Oct 12, 2026 · Primary source
- 2025 PA Schedule O, Other Deductions (PA-40 O) and instructionsPennsylvania Department of Revenue · Oct 12, 2026 · Primary source
- Indiana529 Education Savings Plan CreditIndiana Treasurer of State · Oct 12, 2026 · Primary source
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