529 Plan Contribution Limits and Strategies for 2027

The short answer

A 529 plan is a tax-advantaged account for education savings. Earnings grow free of federal income tax, and withdrawals are tax-free when they pay for qualified education expenses. New Jersey’s 529 program includes the NJBEST 529 College Savings Plan, which you open directly, and the Franklin Templeton 529 College Savings Plan, offered through financial professionals. 529 investments can lose value and plans charge fees, so read a plan’s Program Description before you invest.

Is there a contribution limit?

There’s no federal annual limit on 529 contributions. Two rules shape how much you put in instead:

Each plan sets a maximum for one beneficiary. In the NJBEST plan, contributions stop once all NJBEST accounts for the same beneficiary reach $525,000, a limit raised from $305,000 in September 2026.
Contributions count as gifts to the beneficiary. Gifts up to the annual exclusion, $19,000 per recipient in 2026, generally don’t require a gift tax return or use any of your lifetime gift and estate tax exemption. Each spouse in a married couple can give up to that amount.

The IRS adjusts the annual exclusion for inflation. The 2027 amount had not been published when this guide was last reviewed, and we plan to update this guide once it is.

Front-loading: the five-year election

A special rule lets you contribute up to five years of annual exclusion gifts at once and treat them as spread evenly over five years. For 2026, that’s up to $95,000 per beneficiary from one person, or $190,000 from a married couple who each make the election, reported on a gift tax return (Form 709). Other gifts to the same beneficiary during those five years may then count against your lifetime exemption, and if you die before the five years are up, part of the contribution can be included in your estate.

Grandparents sometimes use this election to move a meaningful sum out of their taxable estate while keeping control of the account as its owner.

What the money can pay for

College and graduate school: tuition, fees, books, supplies, required equipment, and computers and related technology. Room and board qualify for students enrolled at least half-time.
K–12 education: up to $20,000 per year per beneficiary starting in 2026, up from $10,000. Qualified K–12 costs now go beyond tuition to include curriculum materials, books, online materials, tutoring by a qualified tutor who isn’t related to the student, and standardized and admissions test fees.
Career credentials: since July 2025, the costs of recognized postsecondary credential programs, such as tuition, fees, books, required testing, and continuing education.
Registered apprenticeships, plus up to $10,000 over the beneficiary’s lifetime toward student loan payments.

Withdrawals for anything else are taxable on the earnings portion and generally owe an additional 10% tax, with exceptions such as withdrawals up to the amount of a tax-free scholarship. State tax treatment can differ from federal treatment, particularly for K–12 withdrawals, so check before you use a 529 for those costs.

New Jersey benefits

State tax deduction: New Jersey taxpayers with gross income of $200,000 or less can deduct up to $10,000 a year of contributions to an NJBEST account on their state return. Above that income, the deduction isn’t available, but the federal tax benefits and the NJBEST Scholarship still apply.
NJBEST Scholarship: a one-time award of $2,000 to $6,000 for a beneficiary who attends an eligible New Jersey college or university at least half-time. The account must have been open at least four years with at least $1,200 contributed, the award grows with both, and the student or the contributor must be a New Jersey resident when the student attends.

Leftover money: the Roth IRA option

If money is left over, up to $35,000 over the beneficiary’s lifetime can be moved from a 529 into a Roth IRA in the beneficiary’s name. The 529 must have been open for more than 15 years, contributions made in the last five years (and their earnings) can’t be moved, the money must go directly from one account to the other, and each year’s rollover counts toward the beneficiary’s annual Roth IRA contribution limit ($7,500 in 2026, or the beneficiary’s earned income for the year if that’s less). New Jersey treats the earnings moved this way, and any contributions you deducted on your state return, as income for state tax in the year of the rollover. You can also change the beneficiary to another member of the family without owing income tax.

Planning strategies for 2027

Start early and automate contributions. Time is the biggest lever on tax-free growth, and the NJBEST Scholarship grows with how long the account has been open.
Consider front-loading with the five-year election if you have a lump sum to put to work, especially as part of an estate plan.
Coordinate gifts from family. Grandparents and others can contribute to your account or open their own; keep the total within your gift tax plans and the plan maximum.
Weigh K–12 spending against college goals. Money spent on K–12 costs is money that won’t be there for college.
Name a successor owner so the account passes smoothly if something happens to you.
Review the investments as college approaches. Many plans offer age-based portfolios that grow more conservative as the beneficiary gets closer to college.

How We Help

College Savings Planning

Sources

This guide is for general educational purposes only and is not personalized investment, tax, or legal advice. Limits and rules change; figures reflect the published guidance available on the review date. Please consult a qualified professional about your own situation.

Rice Wealth Management Group is a registered investment adviser with the State of New Jersey Bureau of Securities and other states where required and/or exempt from registration. Registration as an investment adviser does not imply any level of skill or training.

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529 Plans: Contribution Limits and Planning Strategies for 2027