There are no annual contribution limits for New York 529 plans, other than the annual gift tax exclusion and 5-year gift-tax averaging. New York 529 plans have the highest cumulative contribution limit of $520,000 per beneficiary.
Annual Contribution Limits
As a general rule, there are no annual contribution limits for any state 529 plan, including the New York 529 plans.
Contributions that exceed the annual gift tax exclusion of $15,000 per beneficiary ($30,000 for a couple giving jointly) may be subject to gift taxes if the contributor does not elect to use 5-year gift-tax averaging.
If the contributor elects to use 5-year gift-tax averaging, a single contributor may give a lump sum of up to $75,000 per beneficiary and a couple giving together may give a lump sum of up to $150,000 per beneficiary.
If there are any gift taxes, they are paid by the contributor. Account owners and beneficiaries do not pay gift taxes.
Aggregate Contribution Limits
Each state sets its own aggregate contribution limit. Usually, the aggregate contribution limit is based on the cost of 7 years of postsecondary education in the state.
In New York, the aggregate contribution limit is $520,000, more than any other state.
Once the New York 529 plan account balance reaches the aggregate contribution limit, no further contributions will be allowed. Excess contributions will be returned to the contributor. However, the New York 529 plans may continue to accumulate earnings after reaching the aggregate limit.
Minimum Contribution to New York 529 Plans
There is no minimum contribution amount for the direct-sold New York 529 plan.
After a $1,000 initial minimum contribution amount for advisor-sold New York 529 plans, subsequent contributions must be at least $25.
Tax Deductions for New York 529 Plan Contributions
Contributions to New York 529 plans are made with after-tax dollars.
Contributions to New York 529 plans may be deducted on the state income tax return, but not on federal income tax returns. The state income tax deduction is capped at $5,000 in contributions by single filers and at $10,000 for married couples filing joint state income tax returns. Ten states have higher state income tax deduction limits on contributions to the state’s 529 plan.
For a taxpayer to be eligible for the state income tax deduction, the contributions must be made by the account owner. Contributions may also be made by the account owner’s spouse, if they file a joint tax return. For example, a grandparent making a contribution to a parent-owned 529 plan is not eligible for the state income tax deduction. The parent cannot claim a state income tax deduction based on the grandparent’s contribution.