Everyone knows that an NC 529 Account is one of the best ways to save for an education. An NC 529 Plan is easy, effective, and anyone can contribute to it. Parents, family, and friends can all do their part to pitch in for education. The best part is that earnings are free from state and federal taxes, as are the earnings you make on those contributions. As people consider saving for college, they often ask, “How much can I contribute to my NC 529 Account annually?” It’s an important question because it can affect how much you can save for college and how it can be taxed.
The short answer is yes. There is a limit to how much you can contribute to your NC 529 Account, but it’s more than you might think. The limit is based on a number called “Maximum Projected Expenses” amount. The number represents the total cost of education based on four years of undergraduate study and three years of graduate study at the most expensive schools in North Carolina.
Currently, the Maximum Projected Expenses are estimated at $450,000 per Beneficiary. The total of any and all 529 Accounts listing the same person as the Beneficiary cannot exceed that number. Thankfully, the number is based on the costliest tuition, helping to ensure that everyone can save enough for any qualified education they wish to pursue.
You might be wondering why there’s a limit on contributions to an NC 529 Plan in the first place. It’s all set up to safeguard families and keep people from saving more than they actually need. The Maximum Projected Expenses amount is set so that students can dream big and save the money necessary to achieve those dreams.
An NC 529 Account is designed to help pay for Qualified Education Expenses. These Qualified Expenses can cover many things from tuition and fees, to books, computers, and more. Qualified Expenses now include K-12 tuition as well.
This explains how much you can contribute to your NC 529 plan in total, but you’re probably wondering how that works when it comes to annual contributions. In addition to the Maximum Projected Expenses limit, there is one other thing that you should consider when it comes to your annual contributions: the gift tax.
For tax purposes, contributions made toward an NC 529 Account are considered gifts. This allows your earnings to remain free from state and federal taxes. However, there is a limit on how much money you can gift to someone without triggering the gift tax. For 2019, you can make a gift of up to $15,000 ($30,000 for married couples) and have your contributions remain excluded from the gift tax.
You have an idea of the maximum amount you can contribute. Now, you may be asking yourself if there’s a minimum contribution requirement or a time table you need to follow. The NC 529 Plan is designed to make saving for college convenient and affordable for everyone in North Carolina. It only takes $25 to start your 529 plan.
What’s more, you can contribute to your NC 529 Account on a schedule that works best for you and decide the best investment option for your goals. You can setup auto-draft payments or schedule to have contributions deducted from your paycheck. You can also add a little money whenever you can, whenever you want. That would include adding a lump sum after receiving your tax refund.
All Savings are Equally Important
No matter how you decide to save or how much you can afford to contribute, the most important thing is that you start saving. Every dollar you can save for higher education matters, and it can make a big difference when it’s time to attend school. It’s never too early or too late to start saving for college. Open your NC 529 Account today.