Planning to open a 529 for a grandchild? Here’s what you need to know.

If you’re planning to invest in a grandchild’s NY 529 account, there are 2 ways to contribute:

• Add money to an existing account. Often the child’s parents open the account and give others the option of adding to it.
• Open a new account and stay in control as the account owner.

Which option is right for you? There are important things to consider:

1. Control over the account.
2. Tax benefits.

1. Protect your future needs and control the assets.

With 529 accounts, the account owner controls the assets. That means:

• You can make sure the money will be used for education. Since you control the account as the account owner, you can ensure that any withdrawals from your account are used for higher education.
• You can change the beneficiary. If one grandchild decides not to pursue higher education, you can transfer the money to another grandchild or other relative who is a member of the family of the original beneficiary.

The bottom line: If flexibility and control are important to you, it may be worth opening an NY 529 account yourself.

2. Take advantage of tax breaks.

Earnings on 529 investments are free from federal and state taxes as long as they’re used for qualified expenses.^1,2

Contributors can get some tax breaks as well:

• State income tax deductions. Contributions to NY 529 of up to $10,000 are deductible annually from New York State taxable income for married couples filing jointly; single taxpayers can deduct up to $5,000 annually.²
• Gift tax exclusions. Whether or not you’re the account owner, a contribution is considered a gift to the beneficiary. As a gift in 2025, it qualifies for the $19,000 ($38,000 if married filing jointly) annual gift tax exclusion. If you want to contribute even more in one year, you can “front load” your gifts. That means if you make a contribution of up to $95,000 ($190,000 if married filing jointly), you can choose to treat the contribution as if it were made over a 5 year period for gift tax purposes.³ Note that if you do this, you won’t qualify for the exclusion again until the 5 years is up.

Give a lasting gift.

Whether you open your own account or make gift contributions to another account, contributing to an NY 529 account can give you a way to take an active role in your grandchild’s education. And you can feel confident you’re making a meaningful difference in your grandchild’s life.

1. Earnings on nonqualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. Tax and other benefits are contingent on meeting other requirements. Please consult your tax advisor about your particular situation.
2. New York State tax deductions may be subject to recapture in certain circumstances such as rollovers to another state's 529 plan, nonqualified withdrawals, and withdrawals used to pay elementary or secondary school tuition as described in the Disclosure Booklet and Tuition Savings Agreement. State tax benefits for non-resident New York taxpayers may vary. Please consult your tax advisor about your particular situation. The New York State Department of Taxation and Finance has not yet determined whether withdrawals to pay expanded K-12 expenses and certain credentialing expenses would be New York Qualified Withdrawals or New York Nonqualified Withdrawals.
3. In the event the donor does not survive the 5-year period, a pro-rated amount will revert back to the donor's taxable estate.