529A(b)(2)(B)(i), i.e., the annual gift tax exclusion amount under Code Sec. 529(c)(3)(C)(i), the amount of any rollover to an ABLE account is limited to the amount that, when added to all other contributions made to the ABLE account for the tax year, does not exceed the contribution limit for the ABLE account under Code Sec. 529A(e)(6)) of the designated beneficiary or a member of the family of the designated beneficiary.
1, 2026, is not subject to income tax if, within 60 days of the distribution, it is transferred to an ABLE account (as defined in Code Sec. 529(c)(3)(C)(i)(III), which provides that a distribution from a 529 plan made after Dec. 529(c)(3)(D) provides that the portion of such a distribution refunded to an individual who is the beneficiary of a 529 plan by an eligible educational institution is not subject to income tax to the extent that the refund: a) is recontributed to a 529 plan of which that individual is the beneficiary not later than 60 days after the date of such refund and b) does not exceed the refunded amount. This could occur, for example, if the beneficiary were to drop a class mid-semester. 529(c)(3)(D) addresses situations in which 529 plan funds are distributed for a beneficiary’s QHEEs, but some portion of those expenses is refunded to the beneficiary by the eligible educational institution. Notice 2001-81applies the same rule to a direct transfer (i.e., a trustee-to-trustee transfer) from a 529 plan to another 529 plan.Ĭode Sec. However, Notice 2001-81, 2001-52 IRB 617, provides that the distributing 529 plan must provide a breakdown of the earnings portion of the rollover amount to the recipient 529 plan and, until the recipient 529 plan receives appropriate documentation showing the earnings portion, the entire rollover amount is treated as earnings. 529(c)(3)(C)(i)(II) permit a tax-free rollover of a distribution from a 529 plan, made within 60 days of the distribution, to another 529 plan for the benefit of either the same designated beneficiary or another designated beneficiary who is a member of the family of the original designated beneficiary. Both amendments apply to distributions made after Dec. 529(e)(3)(A) to limit the total amount of these tuition distributions for each designated beneficiary to $10,000 per year from all 529 plans of the designated beneficiary. 529(c)(7)) The TCJA also amended Code Sec. 115-97, ) expanded the definition of QHEEs to include tuition in connection with the designated beneficiary’s enrollment or attendance at an elementary or secondary public, private, or religious school.
25A(b)(3) (generally, those who are enrolled at least half-time). QHEEs also include reasonable costs for room and board for eligible students as defined in Code Sec. 529(e)(3)(A) defines QHEEs to include tuition, fees, books, supplies, and equipment required for the enrollment or attendance of a designated beneficiary at an eligible educational institution. A 10% additional tax generally applies to amounts subject to tax under this rule. To the extent distributions exceed the designated beneficiary’s QHEEs, a portion of the distribution is included in gross income. 529(c)(3) provides that distributions (including any attributable earnings) from a 529 plan are not included in gross income if such distributions do not exceed the designated beneficiary’s QHEEs. These programs are collectively referred to as 529 plans. In addition, an eligible educational institution may establish or maintain a program that permits a person to prepay a designated beneficiary’s QHEEs. 529, a State or its agency or instrumentality may establish or maintain a program that permits a person to prepay or contribute to an account for a designated beneficiary’s QHEEs. 529 qualified tuition programs (529 plans): a) recontribution of refunded qualified higher education expenses (QHEEs) b) rollover from a 529 plan to an ABLE account and c) elementary and secondary education tuition expenses as QHEEs.īackground. In a Notice and accompanying Information Release, IRS has issued guidance, and announced its intention to issue regs, regarding the following aspects of Code Sec.
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