State-sponsored plans that allow individuals and families to save for educational expenses like college in tax-advantaged accounts. Most states create a government-sponsored investing authority that pools assets and invests for those that save into the plan. Investments grow tax-free and earnings can be withdrawn tax-free if used to pay for qualified educational expenses – usually college and grad school. Some states provide an extra bonus by allowing you to deduct contributions from your income to reduce state taxes as well.
We recommend to keep contributions into a 529 below the annual gift tax exclusion limit of $15,000 per recipient. There is an option to “superfund” a 529 with up to $75,000 contributed at once, but you cannot make an additional gift over the next five years without exceeding the limit.