529 Account End of Year Planning: 5 Steps to Take
As the end of the year rapidly approaches, it’s the ideal time to invest funds for future education. If you have a 529 account or if you are trying to save for college expenses, then you should consider a few key actions as 2026 comes to a close. Think of these 5 things as your annual college savings housekeeping.
- Maximize Gifting
- Consider Super Funding
- Claim Your State Income Tax Deduction (if you can)
- Review Your Investments
- Invest (if you haven't already)
Maximize Gifts
Contributions to a 529 plan are considered gifts for federal tax purposes. This means the federal gifting tax applies. However, most families who contribute to a 529 plan will not pay gift taxes because of the annual gift tax exclusion amount. If your total gifts are less than the annual amount per recipient, you do not have to pay gift taxes.
In 2026 the gift tax exclusion is $19,000 per individual or $38,000 for a married couple filing jointly. This means you can contribute up to that amount without federal gift taxes.
The exclusion is calculated annually and assists with maximizing your account balance while minimizing your tax burden. The end of the year is an ideal time to make additional contributions if you haven’t reached the limit in 2026.
Keep in mind that the gifting exclusion is for all gifts to an individual, not just 529 contributions. If you’ve gifted property, cash, or other things in the calendar year, you’ll need to account for all gifts made in compliance with the $19,000/$38,000 limit for 2026.
Consider Super Funding Your Account
If you are looking to jump start a 529 account, you can consider front-loading or super funding the account. The end of the year is a great time to do this.
Super funding allows you to front-load a large 529 contribution without having to pay the gift tax. You can front-load five years of 529 contributions into a single gift and avoid having to pay the annual gifting tax. This means you can contribute $19,000 x 5 years, for a total of $95,000 at once (or $190,000 if you are married and filing jointly) in 2026.
If you do this, you would not be able to contribute to the account for the next five years without paying gifting taxes. It’s a smart strategy because the longer funds are in a 529 account, the more time they have to grow. If you are able to front-load a large contribution instead of contributing a smaller amount over the course of five years, it can help to maximize your account balance and potential earnings.
This strategy is often used by families with large estates that are interested in minimizing their heirs’ estate taxes. The federal estate and gift tax lifetime exemption is $13.99 million per person in 2026. If you expect your estate to be greater than that amount when you pass away, super funding a 529 can help lower the taxable value of your estate, since 529 accounts are exempt from estate taxes.
Claim Your State Tax Deduction
Many states allow you to claim a state tax deduction on contributions to a 529 plan annually. If you live in one of these states, make sure you know how much you contributed in 2026 so you are ready to claim the full amount you are eligible for when you do your taxes.
For New Mexico residents, 100 percent of contributions to The Education Plan® are deductible from your state income taxes when funds are used to pay for qualified education expenses.
Every state has different rules, so make sure you understand the requirements in your state.
Review Your Investments
IRS regulations allow you to change your 529 investment selection two times within a calendar year without any penalties. The end of each year is a great time to review your 529 investments and ensure they still meet your needs.
To review your investments or changes your selections in an account with The Education Plan, you can log into your account and click “Change Investment Options” on the left-hand toolbar.
Open An Account
If you haven’t opened a 529 account yet, or if you’ve been meaning to open an account for another family member, now is the time. If you live in a state like New Mexico that allows you to deduct your contributions from your state income taxes when used to pay for qualified expenses, opening an account and making a contribution can help ease your tax burden when it comes time to file next year.
Remember, it’s never too early or too late to start saving for college. The best time is always now! You can open an account with The Education Plan here.
Frequently Asked Questions
A 529 plan is a tax-advantaged investment account that is designed to grow savings for future education expenses for a specified beneficiary. 529 plans offer unique benefits and features that make them an appealing strategy for education related saving.
A 529 plan can be used for “qualified educational expenses.” For federal tax purposes, qualified educational expenses include:
- Tuition and fees at accredited higher education institutions
- Books
- Supplies and equipment
- Room and board for beneficiaries attending on at least a half-time basis.
- Computer technology, equipment, and internet access
- Up to $10,000 a year for K-12 tuition and expenses (Limit increase to $20,000 in 2026)
- Expenses for educational special needs services
- Transfers to an ABLE account for the beneficiary (transfer subject to annual limit)
- Apprenticeship expenses
- Up to $10,000 for student loan repayment
- Credentialing expenses and certification programs
- Roth IRA rollover for the beneficiary
If you're not sure if an expense is considered "qualified," we recommend consulting with a tax professional or advisor. Unqualified expenses will be treated like ordinary income: state and federal taxes will apply, with a 10% federal penalty for withdrawals from your 529 plan used to pay for them.
New Mexico residents can deduct contributions to The Education Plan from their state taxable income each year. This includes contributions made to an account that you are not the account owner of.
You cannot deduct contributions from federal income taxes.
Any person at least 18 years old with a valid Social Security Number (SSN) or Tax Identification Number (TIN) can open a 529 account. The account holder chooses the investment options, designates a beneficiary, and requests the distribution of funds.
The cost of college continues to rise, including tuition, housing, food and supplies, so it’s important to begin saving as soon as possible. You can learn more about how much a typical college education costs on our Cost of College page. It’s never too early or too late to start.
The Education Plan offers a variety of investment options to fit you and your family’s needs, risk tolerance and goals. You can see all of the available investment portfolios on the investments page.
Yes, you can use up to $20,000* a year to cover tuition and expenses for K-12 education.
Qualified K-12 expenses include:
- Tuition (public, private, and religious)
- Curriculum materials, books (including digital/online) and instructional materials
- Tutoring and instructional classes**
- Fees for a nationally standardized norm-referenced achievement test, an advanced placement examination, or any examinations related to college or university admission
- Dual enrollment program fees
Educational therapies for students with disabilities provided by a licensed or accredited practitioner or provider, including occupational, behavioral, physical, and speech-language therapies
*Starting in tax year 2026. The annual limit is $10,000 in tax year 2025 and permitted for tuition only.
**Tuition for tutoring or educational classes outside of the home, including at a tutoring facility, but only if the tutor or instructor is not related to the student and—
(i) is licensed as a teacher in any State,
(ii) has taught at an eligible educational institution,
or (iii) is a subject matter expert in the relevant subject.
You can open an account with The Education Plan online or by mailing in the enrollment form. In order to open an account, you will need the following information:
- Your social security number or TIN
- Your address
- Your bank account information (in order to fund the account)
- The beneficiary’s social security number or TIN
- The beneficiary’s birthday
-The beneficiary’s address
