The formulas
- Spread limit = 5 x $19,000 = $95,000 per donor ($190,000 with gift splitting)
- Each year = spread / 5
- Taxable 2026 gift = yearly share + other gifts above the exclusion + contribution above the spread limit
How it works
Section 529(c)(2)(B) lets a donor elect to treat contributions above the annual exclusion as made ratably over five years. Form 709 instructions explain the election on Schedule A, line B: for a $19,000 exclusion, up to $95,000 is spread, one-fifth reported each year.
The 2026 annual exclusion is $19,000 under Rev. Proc. 2025-32, so a married couple splitting gifts can front-load $190,000. Later increases in the exclusion during the five years leave room for extra gifts. If the donor dies within the five years, the part for years after death is included in the estate.
Illustrative figures only. Check the result against your firm's methodology before relying on it.
Common questions
Do I file Form 709 every year?
You file in the year of the election and report the one-fifth share in later years when you file.
Can I give other gifts to the same child?
Gifts beyond the yearly share use lifetime exclusion, since the annual exclusion is already applied to the 529 share.
What happens at death in year 3?
The shares for years 4 and 5 are pulled back into the donor's estate.
Sources
- 26 U.S.C. 529, Qualified tuition programs (LII)
- IRS Instructions for Form 709 (2025)
- IRS Rev. Proc. 2025-32, 2026 inflation-adjusted items (IRB 2025-45)
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