529 - what is max amount I can put in as a lump sum upon opening account?

[Anonymous]

I am in VA and plan to buy VA's plan. I have $40k to distribute across two kids. Can I open two account with $20k each? I got a little confused about gift tax. I think the tax benefit gets bumped out however many years $20k covers, correct? What happens if I move outside of VA, though?

[Anonymous]

Yes you can count $14,000 of each pair of 20k towards this year's gift tax and the rest toward next year's.

[Anonymous]

Anonymous wrote:Yes you can count $14,000 of each pair of 20k towards this year's gift tax and the rest toward next year's.

No that's not how it works at all.

If you want to put in more than the gift tax limit, you have to file a gift tax return, and the amount you put in gets spread over 5 years (and if you put in more in any of the next 4 years you may need to file another gift tax return). If you have a spouse, you could either make joint gifts or split gifts, which would bring you under the gift tax limit as well. (If spreading the amount over 5 years still leaves over the gift tax limit then it would come off your lifetime estate tax exemption.)

There is a rollforward for the VA state tax deduction-- each year you can only deduct $4000, so if you put in more than that this year, you can deduct the excess next year, and whatever's still left the year after, etc.

[Anonymous]

Which part of what you said contradicted what I said?

[Anonymous]

Anonymous wrote:Which part of what you said contradicted what I said?

if you can't tell maybe you should stop offering people tax advice on the internet

[Anonymous]

If you are doing the va529 invest and you have a spouse you can do it all current year and not have to worry about gift tax, and you can deduct it all for va income tax on your current year return.

The gift tax issue exclusion is 14k per year per donor/donee. So if you contribute 10k for each kid and your spouse contributes 10k for each kid you work around the gift tax issue.

VA Invest accounts are treated as unique accounts with a 4k deduction for every account owner/beneficiary/investment choice combination. So if you do:

You/DC1/investment1: 4k
You/DC1/investment2: 4k
You/DC1/investment3: 2k
You/DC2/investment1: 4k
You/DC2/investment2: 4k
You/DC2/investment3: 2k
Spouse/DC1/investment1: 4k
Spouse/DC1/investment2: 4k
Spouse/DC1/investment3: 2k
Spouse/DC2/investment1: 4k
Spouse/DC2/investment2: 4k
Spouse/DC2/investment3: 2k

You can contribute 20k per kid and deduct them all on that years return. This is ONLY for the invest plan, not the prepaid or the brokered plans.

[Anonymous]

Anonymous wrote:If you are doing the va529 invest and you have a spouse you can do it all current year and not have to worry about gift tax, and you can deduct it all for va income tax on your current year return.

The gift tax issue exclusion is 14k per year per donor/donee. So if you contribute 10k for each kid and your spouse contributes 10k for each kid you work around the gift tax issue.

VA Invest accounts are treated as unique accounts with a 4k deduction for every account owner/beneficiary/investment choice combination. So if you do:

You/DC1/investment1: 4k
You/DC1/investment2: 4k
You/DC1/investment3: 2k
You/DC2/investment1: 4k
You/DC2/investment2: 4k
You/DC2/investment3: 2k
Spouse/DC1/investment1: 4k
Spouse/DC1/investment2: 4k
Spouse/DC1/investment3: 2k
Spouse/DC2/investment1: 4k
Spouse/DC2/investment2: 4k
Spouse/DC2/investment3: 2k

You can contribute 20k per kid and deduct them all on that years return. This is ONLY for the invest plan, not the prepaid or the brokered plans.

But do I have to have multiple accounts per child to do this? I.e., does my spouse have to have a separate account for each child (meaning 4 accounts total)?

[Anonymous]

For the inVEST you would have an account and your spouse would have an account (1 login for you, 1 login for your spouse). Every investment choice for each kid is a separate "contract" within that account, so you would have 6 contracts in your account, your spouse would have another 6. It is very easy to manage, similar to different mutual funds in a 401k or brokerage portfolio.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Yes you can count $14,000 of each pair of 20k towards this year's gift tax and the rest toward next year's.

No that's not how it works at all.

If you want to put in more than the gift tax limit, you have to file a gift tax return, and the amount you put in gets spread over 5 years (and if you put in more in any of the next 4 years you may need to file another gift tax return). If you have a spouse, you could either make joint gifts or split gifts, which would bring you under the gift tax limit as well. (If spreading the amount over 5 years still leaves over the gift tax limit then it would come off your lifetime estate tax exemption.)

There is a rollforward for the VA state tax deduction-- each year you can only deduct $4000, so if you put in more than that this year, you can deduct the excess next year, and whatever's still left the year after, etc.

If I understand the rules correctly, you can contribute up to $70,000 per account owner (e.g. a parent) per beneficiary (e.g. a child) upfront without having to deal with gift tax (this will max your contribution for the next 5 years). See "Dispelling 529 Plan Myths" item #3 in the blue box all the way in the bottom (https://www.fidelity.com/viewpoints/abcs-of-529-college-savings).

[Anonymous]

Anonymous wrote:

Anonymous wrote:If you are doing the va529 invest and you have a spouse you can do it all current year and not have to worry about gift tax, and you can deduct it all for va income tax on your current year return.

The gift tax issue exclusion is 14k per year per donor/donee. So if you contribute 10k for each kid and your spouse contributes 10k for each kid you work around the gift tax issue.

VA Invest accounts are treated as unique accounts with a 4k deduction for every account owner/beneficiary/investment choice combination. So if you do:

You/DC1/investment1: 4k
You/DC1/investment2: 4k
You/DC1/investment3: 2k
You/DC2/investment1: 4k
You/DC2/investment2: 4k
You/DC2/investment3: 2k
Spouse/DC1/investment1: 4k
Spouse/DC1/investment2: 4k
Spouse/DC1/investment3: 2k
Spouse/DC2/investment1: 4k
Spouse/DC2/investment2: 4k
Spouse/DC2/investment3: 2k

You can contribute 20k per kid and deduct them all on that years return. This is ONLY for the invest plan, not the prepaid or the brokered plans.

But do I have to have multiple accounts per child to do this? I.e., does my spouse have to have a separate account for each child (meaning 4 accounts total)?

We have two kids and that's what we did.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Yes you can count $14,000 of each pair of 20k towards this year's gift tax and the rest toward next year's.

No that's not how it works at all.

If you want to put in more than the gift tax limit, you have to file a gift tax return, and the amount you put in gets spread over 5 years (and if you put in more in any of the next 4 years you may need to file another gift tax return). If you have a spouse, you could either make joint gifts or split gifts, which would bring you under the gift tax limit as well. (If spreading the amount over 5 years still leaves over the gift tax limit then it would come off your lifetime estate tax exemption.)

There is a rollforward for the VA state tax deduction-- each year you can only deduct $4000, so if you put in more than that this year, you can deduct the excess next year, and whatever's still left the year after, etc.

If I understand the rules correctly, you can contribute up to $70,000 per account owner (e.g. a parent) per beneficiary (e.g. a child) upfront without having to deal with gift tax (this will max your contribution for the next 5 years). See "Dispelling 529 Plan Myths" item #3 in the blue box all the way in the bottom (https://www.fidelity.com/viewpoints/abcs-of-529-college-savings).

If you file a gift tax return (and make no other gifts/contributions)-- be sure to read the footnote to that third item.