Make the Most of Your 529 Plan This Year

A 529 plan is one of the best ways to secure a bright future for your loved ones through education. These tax-advantaged savings plans help you tackle the rising cost of tuition while offering flexibility for a variety of educational expenses. With some key changes kicking in for the 2024/2025 school year, now’s a great time to revisit your plan and make sure you’re making the most of it.

A Quick Refresher on 529 Plans

Not familiar with the basics? No worries. Here’s how 529 plans work and why they’re such a popular option for saving for education.

A 529 plan is a state-sponsored savings account that offers tax advantages to help families save for educational expenses. Your earnings grow tax-free, and as long as you use the money for qualified education expenses, withdrawals are tax-free too. Plus, many states—like Georgia and South Carolina—offer extra tax deductions for contributions to their plans. 

It’s important to note that anyone can open a 529 plan—not just parents. Grandparents, aunts, uncles, and even family friends can establish a 529 plan for someone they care about—or even for themselves. The account owner remains in control of how and when the funds are used.

Tip: Learn more about 529 plans in Georgia and South Carolina.

What’s New in 2024/2025 for 529 Plans?

Recent changes to 529 plans bring even greater flexibility and opportunities to grow your savings. Here’s what’s different this school year:

Rollovers to Roth IRAs 

Starting in 2024, you can roll over unused 529 plan funds into a Roth IRA for the plan’s beneficiary. This is a great way to avoid penalties on leftover funds while turning them into tax-advantaged retirement savings. However, there are rules to follow. The rollover must stay within the yearly Roth IRA contribution limits, so you can’t move all the funds at once if they exceed the annual cap. Plus, the total amount you can roll over is limited to $35,000 over a lifetime. This option ensures your savings keep working for the future, even if they’re not used for education.

It’s also important to keep in mind that for this advantage to take effect, the 529 account must have been open for at least 15 years.

Simplified Financial Aid Reporting

Starting in the 2024-2025 school year, money from nonparent-owned 529 plans—like ones set up by grandparents, other family members, or friends—doesn’t count as untaxed income that needs to be reported on the FAFSA (Free Application for Federal Student Aid).

In the past, withdrawals from these plans could lower a student’s financial aid eligibility. But now, those contributions no longer impact aid calculations, making these accounts an even better choice for family members looking to help save for education.

Higher Contribution Limits

Some states have increased their aggregate 529 plan limits in 2025, making it easier for families to save more over time.

South Carolina

In South Carolina, the aggregate lifetime contribution limit for a single beneficiary across all 529 accounts has risen from $540,000 to $575,000. South Carolina has no annual contribution limits.

Tip: Check Future Scholar’s FAQ for more information on contribution limits and deductions.

Georgia

In Georgia, the annual contribution limits haven’t changed from last year. Individuals can contribute up to $4,000 per year for each account, and married couples filing jointly can contribute up to $8,000 per year for each account. The lifetime limit remains at $235,000 per beneficiary.

Tip: Check Path2College’s FAQ for more information on contribution limits and deductions.

At the federal level, the annual gift tax exclusion limit keeps increasing with inflation. This means you can now make a larger one-time contribution without triggering gift taxes if you live in a state without annual 529 contribution limits (such as South Carolina).

• In 2024, individuals could contribute up to $18,000 per beneficiary each year (or $36,000 if married and filing jointly) before needing to file a gift tax return.
• For 2025, those limits have increased to $19,000 for individuals and $38,000 for married couples filing jointly.

Tips for Maximizing a 529 Plan

No matter where you are on your savings journey, these strategies can help you get the most from your 529 plan.

Start Early, or Start Now

The earlier you begin, the more time your money has to grow. If you’re saving for a newborn or young child, even small contributions now can mean big returns over time. But don’t worry if you’re starting late—there are still meaningful tax advantages to be gained, no matter your timing. Take advantage of state tax deductions and consider lump-sum funding where possible to maximize growth opportunities.

Contribute Regularly 

Building savings is a marathon, not a sprint. Setting up automatic contributions is an easy way to ensure regular deposits (and it eliminates the chance of forgetting to save). Even modest monthly contributions add up over the years.

Review and Adjust Your Plan Annually 

Life changes—and your savings plan should, too. Take time at the start of each year to review whether your 529 account is on track. Some states (South Carolina and Georgia included) allow for two investment allocation changes annually, providing room to adapt if needed.

Avoid Overfunding 

It’s great to aim high with your savings, but be careful not to overdo it. Tools like college cost calculators can help you estimate realistic expenses. If you end up with extra funds, the new Roth IRA rollover option is a smart way to put that leftover balance to good use, after the account is 15 years old.

Pro tip: To plan ahead and see how your account can grow, use Path2College’s college savings calculator.

Engage Family Members 

A 529 plan doesn’t have to be funded by just one person. Encourage relatives to contribute in lieu of traditional gifts for birthdays or holidays. It’s a meaningful way for extended family members to invest in your child’s future.

Keep All Records Organized   

When it comes time to withdraw funds, it’s important to have all relevant paperwork in order. This is particularly important for verifying qualified expenses and tax deductions.

Partner with SME CPAs for Smarter Savings

Navigating the nuances of 529 plans—especially with recent rule changes—can get overwhelming, but you don’t have to go it alone. At SME CPAs, we’re here to guide you. With a team of experienced financial professionals, we help you develop a plan tailored to your unique needs. Whether you’re planning for a newborn, a high school senior, or even your own continuing education, we provide clear strategies to maximize what your 529 plan can do for you.

Start your year off strong by sitting down with one of our advisors to fine-tune your educational savings strategy. Get in touch with SME CPAs today, and together, we’ll ensure your 529 plan is working as hard for you as you are for your family.

It’s never too late to begin—or too early to refine—your savings plan. Reach out, and let’s maximize your 529 plan this year and beyond.