The contribution limit for any 529 plan is the amount needed to pay for qualified education expenses, according to the Internal Revenue Service. The gift tax applies to any amount contributed in excess of the gift tax limit for the contribution year. In 2014, the gift tax limit was $14,000.
Qualified Tuition Program is the legal name of 529 plans, states the IRS. These plans allow invested funds to grow and be used tax-free as long as the funds and earnings are used for qualified tuition purposes. Prepaid tuition plans and savings plans are the two basic types of 529 plans available.
The states, and some educational institutions, administer their own 529 plans and determine which type of plan to offer, says the IRS. However, individuals are not required to use their state's 529 plan and can shop the plans offered by other states or institutions.