529 super funding

[tax111119991]

Hi - I live in New York State. In 2024, I superfunded a 529 last year (I.e., contributed more than $5K although only $5K per year is deductible on state taxes). When entering into TurboTax (desktop) should I enter $5,000 as the amount of the contribution? Or should I enter the full $20,000?

If only entering $5000 for 2024 (even though I contributed $20000), then when I do my 2025 NY return next year, should I enter $5000 again, and do the same for each following year until I've used up the $20,000 contribution?

Thank you!

[MarilynG1]

You should enter no more than 5K (10K if MFJ) for New York 529  Contributions in 2024.  You can contribute as much as you want to a 529 plan, but can only deduct the 5K/10K on your New York tax return.  You can't claim a deduction in a future year for contributions made in a prior year. 

If you contribute more than the annual gift tax exclusion to a New York 529 plan, you may need to file IRS Form 709. You can also use the 5-year gift tax averaging strategy to make larger contributions without affecting your lifetime gift tax exclusion. 

Explanation

• The IRS considers 529 plan contributions as gifts for federal tax purposes. 
• In 2025, the annual gift tax exclusion is $19,000 per donor per beneficiary. 
• Married couples filing jointly can each contribute up to $19,000. 
• You can use the 5-year gift tax averaging strategy to treat a single large contribution as if it were made over five years. 
• For example, you could treat a $95,000 contribution as if it were $19,000 per year for five years. 

Here's more info from New York 529 Advisor. 

[Edited 2/17/2025 | 3:51 pm]

[tax111119991]

Thanks. I am getting the same error. This is clearly a glitch in the product. I am reluctant to submit a file with my personal information and, honestly, don't want to spend the time stripping it out in a new file. This is an error that TurboTax should correct. Could you please submit it to the tech team?

[AnnetteB6]

After taking a closer look at the input screens for New York 529 plan contributions and the way that TurboTax handles these inputs, the program is responding appropriately.  

The input screen cautions the user not to enter an amount over $5000 (or $10,000 if Married Filing Joint).  If that maximum limit is exceeded, then an error condition is created to let the user know that the input must be corrected.  

Further, some states allow 529 plan contributions to carry forward to future tax years if the full contribution cannot be deducted in a single year.  Based on the Instructions for NY Form IT-201, there are no provisions for a carry forward of excess contributions.

@tax111119991 

[tax111119991]

OK thank you. So in this instance, since I essentially pre-made the next four years' contributions, should I then enter a $5,000 deduction next year even if I don't make any additional contributions in tax year 2025?

[AmyC]

We can't predict what the laws will be next year- so check back then. Currently, there is not a carryover for the funds and you would not make an entry for funds you did not contribute next year.

[Hal_Al]

Q. I essentially pre-made the next four years' contributions, should I then enter a $5,000 deduction next year even if I don't make any additional contributions in tax year 2025?

A. No. The rules are that you can only deduct what you actually contributed in 2025. "Essentially" isn't good enough. 

As the other reply indicated, some states do allow you to do that. But, NY is not one of them .  It's called a carryover or carry forward.