Federal and state 529 plans can and will get changes every year. In this article, we outline the Federal changes from the 2021 version.
529 plans do not have annual contribution limits. However, contributions to a 529 plan are considered completed gifts for federal tax purposes, and in 2022 up to $16,000 per donor ($15,000 in 2021), per beneficiary qualifies for the annual gift tax exclusion.
Recent changes to FAFSA rules will upend all of this for grandparent-held 529 accounts in the near future.
New changes to the simplified Free Application for Federal Student Aid (FAFSA) form mean that students will not be required to report any support they receive, including funds from grandparent-held 529 accounts, in the future. This means funds in grandparent 529 plans won’t be counted against college goers at all — not when the FAFSA is filled out and not later on when distributions are disbursed to cover eligible college expenses.