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Find the right 529 plan

These plans let you grow contributions tax-free and use the funds for education expenses. See the plans offered by every state.

If you’re worried about how you’ll pay for your child’s higher education, consider a 529 plan. The appeal is simple: Grow your funds in a tax-advantaged account and when your child is ready for college, they can use the funds to cover a variety of education expenses.

What is a 529 plan?

A 529 plan is an account that grows your after-tax contributions. The beneficiary can later withdraw the funds from this account tax-free to pay for qualifying educational expenses.

Types of 529 plans

There are two primary types of 529 plans:

College savings plans

These are offered only by states. You’ll contribute after-tax income to an account, after which you can invest in mutual funds, stocks, bonds and more.

Prepaid tuition plans

These are available from states and colleges. They allow you to prepay the cost of tuition at eligible institutions. The advantage of this is you’ll pay current prices instead of waiting until tuition rises.

All 50 states and the District of Columbia offer 529 plans. Most individuals elect to open a state-sponsored 529 college savings plan. With most state-run plans your investments may fluctuate in value, and you’ll pay tuition when your child starts college.
Prepaid tuition plans, such as Private College 529 plans, are promoted by more than 250 private colleges. These plans let you pay for tuition in advance to lock in current rates.

Do I have to use my state’s 529 plan?

No, you’re not required to use your state’s 529 plan. You can invest in a 529 plan from any state or opt for a Private College 529 plan. Moreover, the 529 plan you choose has no impact on where your child can attend college.
Some states sweeten the pot with an incentive to invest in your own state’s 529 plan, with perks like:

  • Contributions that may qualify for a state income tax deduction or a tax credit.
  • Potential employer matches to your 529 contributions that qualify for a company state income tax credit or deduction.
  • Account fee waivers.

Be sure to consider other factors when weighing your home state’s 529 plan. For example, look at the plan’s investment choices, target date options and portfolio performance, which may be more valuable than your home state’s plan benefits.

Benefits of 529 plans

A 529 plan can offer multiple benefits for educational expenses and your pocketbook, including:

  • Covering eligible expenses at qualifying colleges. Start saving early and you’ll be financially prepared by the time your child goes to college.
  • Using funds for K-12 tuition. Withdraw up to $10,000 a year tax-free to pay for tuition at public, private or religious schools.
  • No federal tax on earnings. While you can’t deduct your contributions on your taxes, your earnings will grow without being dinged by federal taxes. The funds you withdraw for qualifying college expenses also won’t be taxed.
  • Additional tax benefits. Many states offer tax deductions or tax credits for your 529 plan.

529 college savings plan tax benefits by state

See if your state offers tax deductions and credits.

StateTax deduction or creditApplies to…Maximum contribution deduction/credit applies to per yearApplies to contributions to other states’ 529 plans
  • CollegeCounts 529 Fund
  • $5,000 (individual)
  • $10,000 (married, filing jointly)
  • Alaska 529
  • Arizona Family College Savings Program
  • Fidelity Arizona College Savings Plan
  • $2,000 (individual)
  • $4,000 (married, filing jointly)
  • GIFT College Investing Plan
  • Contribution to Arkansas 529 plan: $5,000 (individual); $10,000 (married, filing jointly). 4-year carryforward for excess contributions
  • Contribution to non-Arkansas 529 plan: $3,000 (individual); $6,000 (married, filing jointly)
  • Rollover contributions from non-Arkansas plan: $7,500 (individual); $15,000 (married, filing jointly)
  • Employer 529 match for Arkansas plans:$500 per employee
  • ScholarShare College Savings Plan
  • Direct Portfolio College Savings Plan
  • Smart Choice College Savings Plan
  • Stable Value Plus College Savings Plan
  • Contribution to Colorado 529 plan: Up to taxable income
  • Employer contribution to employee plan: 20% credit, up to $2,500 per employee
  • Connecticut Higher Education Trust (CHET)
  • $5,000 (individual)
  • $10,000 (married, filing jointly)

Five-year carryforward for excess contributions

  • Delaware College Investment Plan
District of ColumbiaDeduction
  • DC College Savings Plan
  • $4,000 (individual)
  • $8,000 (married, filing jointly)

Five-year carryforward for excess contributions

  • Florida 529 Savings Plan
  • Path2College 529 Plan
  • $4,000 per beneficiary (individual)
  • $8,000 per beneficiary (married, filing jointly)
  • Hawaii’s College Savings Program
  • Idaho College Savings Program (IDeal)
  • $6,000 (individual)
  • $12,000 (married, filing jointly)
  • Employer contribution to employee plan: 20% credit, up to $500 per employee per year
  • Bright Start Direct-Sold College Savings Program
  • Contribution to Illinois 529 plan: $10,000 (individual), $20,000 (married, filing jointly)
  • Rollover contribution: Principal eligible for deduction
  • Employer 529 match for Illinois plans: 25% credit, up to $500 per employee per year. Five-year carryforward for unused credits
  • CollegeChoice 529 Direct Savings Plan
  • CollegeChoice CD 529 Savings Plan
20% credit on up to $5,000 per year in contributions (maximum credit of $1,000 per year)No
  • College Savings Iowa
  • $3,474 per beneficiary (individual)
  • $6,948 per beneficiary (married, filing jointly)
  • Learning Quest 529 Education Savings Program
  • Schwab 529 College Savings Plan
  • $3,000 per beneficiary (individual)
  • $6,000 per beneficiary (married, filing jointly)
  • KY Saves 529
  • START Saving Program
  • $2,400 per beneficiary (individual)
  • $4,800 per beneficiary (married, filing jointly)

You can apply the unused cap amount to future tax years

  • Maine NextGen 529 Client Direct Series
  • Maryland Senator Edward J. Kasemeyer College Investment Plan
  • $2,500 per beneficiary (individual)
  • $5,000 per beneficiary (married, filing jointly)

10-year carryforward for excess contributions

  • U.Fund College Investing Plan
  • $1,000 (individual)
  • $2,000 (married, filing jointly)
  • Michigan Education Savings Program (MESP)
  • $5,000 (individual)
  • $10,000 (married)
MinnesotaBoth available
  • Minnesota College Savings Plan
  • Deduction: $1,500 (individual); $3,000 (married, filing jointly)
  • Credit: 50% of contributions, minus withdrawals. $500 maximum
  • Mississippi Affordable College Savings (MACS) Program
  • $10,000 (individual)
  • $20,000 (married, filing jointly)
  • MOST 529 (direct-sold)
  • $8,000 (individual)
  • $16,000 (married, filing jointly)
  • Achieve Montana
  • $3,000 (individual)
  • $6,000 (married, filing jointly)
  • Bloomwell 529 Education Savings Plan
  • Nebraska Education Savings Trust (NEST) 529
  • $10,000 (individual)
  • $5,000 (married, filing separate returns)
Earnings of rollovers from non-Nebraska plans
  • USAA 529 College Savings Plan
New HampshireNone
  • UNIQUE College Investing Plan
New JerseyNone
  • NJBEST 529 College Savings Plan
New MexicoDeduction
  • The Education Plan
Fully deductibleNo
New YorkDeduction
  • NY 529 Direct Plan
  • $5,000 (individual)
  • $10,000 (married, filing jointly)
North CarolinaNone
  • College Foundation of North Carolina
North DakotaDeduction
  • NC 529 Plan
  • $5,000 (individual)
  • $10,000 (married, filing jointly)
  • CollegeAdvantage
  • $4,000 per beneficiary (any filing status)

Carryforward for excess contributions applies indefinitely

  • Oklahoma College Savings Plan
  • $10,000 (individual)
  • $20,000 (married, filing jointly)

Five-year carryforward for excess contributions

  • Oregon College Savings Plan
  • $2,435 (individual)
  • $4,865 (married, filing jointly).

Four-year carryforward for excess contributions

  • Pennsylvania 529 Investment Plan
  • $15,000 per beneficiary (individual)
  • $30,000 per beneficiary (married, filing jointly)
Rhode IslandDeduction
  • CollegeBound Saver (direct-sold)
  • $500 (individual)
  • $1,000 (married, filing jointly).

Carryforward for excess contributions applies indefinitely

South CarolinaDeduction
  • Future Scholar 529 College Savings Plan (direct-sold)
Fully deductibleNo
South DakotaNone
  • College Access 529
  • TN Stars College Savings 529 Program
  • Texas College Savings Plan
  • my529
  • 4.95% on up to $2,070 in contributions per beneficiary (individual)
  • 4.95% on up to $4,140 in contributions per beneficiary (married, filing jointly)
  • Maximum annual credit of $102.47 per beneficiary (individual) or $204.93 per beneficiary (married, filing jointly)
  • Vermont Higher Education Investment Plan
  • 10% on up to $2,500 in contributions per beneficiary (individual)
  • 10% on up to $5,000 in contributions per beneficiary (married, filing jointly)
  • Maximum annual credit of $250 per beneficiary (individual) or $500 per beneficiary (married, filing jointly)
  • Invest529
  • $4,000 per account

Carryforward for excess contributions applies indefinitely

  • DreamAhead College Investment Plan
West VirginiaDeductible
  • SMART529 Select
  • SMART529 WV Direct College Savings Plan
Fully deductibleNo
  • Edvest
  • $3,380 per beneficiary

Excess-contribution carryforward for one or more future years

Rollovers from non-Wisconsin 529 plans
  • No state plan

529 prepaid tuition plans

Prepaid tuition plans may be an option to protect yourself from rising tuition in the future. See which states currently offer prepaid tuition plans.

StatePlan nameGuaranteedEnrollment periodMaximum deduction per year
FloridaFlorida Prepaid College PlanYes: full faith and credit of stateEnroll anytimeN/A
MarylandMaryland Prepaid College TrustLegislative guaranteeDec. 1 to June 30
  • $2,500 per account (individual)
  • $5,000 per beneficiary (married, filing jointly)

Carryforward for excess payments indefinitely

MassachusettsU.Plan Prepaid Tuition ProgramYes: full faith and credit of stateMay 1 to June 30
  • $1,000 (individual)
  • $2,000 (married, filing jointly)
MichiganMichigan Education Trust (MET)NoDec. 1 to Sept. 30
  • $5,000 (single)
  • $10,000 (married, filing jointly)
MississippiMississippi Prepaid Affordable College Savings (MPACT) ProgramYes: full faith and credit of stateSept. 1 to May 31
  • $10,000 (single)
  • $20,000 (married, filing jointly)
NevadaNevada Prepaid Tuition ProgramNoNov. 1 to March 31N/A
PennsylvaniaPA 529 Guaranteed Savings PlanNoEnroll anytime
  • $15,000 per beneficiary (single)
  • $30,000 per beneficiary (married, filing jointly)
TexasTexas Tuition Promise FundNoSept. 1 to Feb. 28 (Feb. 29 in leap years). Deadline extended to July 31 for children under 1 year oldN/A
WashingtonGuaranteed Education Tuition (GET)Yes: full faith and credit of stateNov. 1 to May 31N/A
Not state-sponsoredPrivate College 529 PlanEach participating school commits to accepting tuition certificates for tuition and mandatory feesEnroll anytimeN/A

Many states have closed their plans to new enrollment. Virginia’s Prepaid529 plan closed for new enrollment in May 2019. But administrators say a similar program is in the works. Illinois’ prepaid plan is seeking funding from the state legislature, and enrollment is currently on hold.
Before enrolling in a prepaid plan, consider whether it’s guaranteed by your state. If it’s not, you may later find your payments are insufficient to cover tuition.

Risks of 529 plans

529 plans provide multiple benefits. But you’ll want to watch out for potential pitfalls to protect your money, including:

  • Penalties for non-education expenses. You’ll pay taxes on your earnings — along with an additional 10% penalty — if you take out a nonqualified distribution.
  • Less flexibility. Unlike a savings account, it’s disadvantageous to move funds out of a 529 plan given the withdrawal penalties and taxes you’ll incur.
  • Fees for taking out too much money. If you take out funds beyond those required for qualified education expenses, you’ll incur a tax burden and 10% penalty on the excess amount.
  • Having too much money in your 529 plan. You’ll take on tax and penalty fees if you have any leftover funds in your account and no qualifying expenses for them.

Fees to watch out for

Look for a plan with low fees, so your contributions can grow as quickly as possible. Here are major fees to consider:

  • Management and administration fees. An outside firm will typically manage your 529 plan. This means that the firm and state agency who administers your plan will likely take a cut ranging from 0.10% to 0.70%.
  • Investment fees. Mutual funds are very common in 529 plans and they typically have expense ratios below 0.15%.
  • Charges for buying through an advisor. You may pay a commission to your advisor as high as 5% to 6% for their guidance.
  • Account maintenance fees. Your plan may charge a yearly maintenance fee ranging from $10 to $25. You might have this cost waived if you meet requirements such as living in the state that issues your 529 plan or making automatic contributions.

Adviser-sold vs. direct-sold 529 plans

When you’re ready to open a 529 college savings plan, consider whether you want to work with a financial adviser or directly through a 529 provider.

Adviser-sold 529 plans

A financial advisor will provide guidance and help you stay on track with funding your 529 plan. Your advisor may also assemble a unique mix of investments that you wouldn’t find with a direct-sold 529 plan.
But you’re likely to pay higher fees than you would with a direct-sold plan. Your adviser will charge you a commission and they may put your money into actively managed funds that come with higher fees, rather than passively manage your funds.

Direct-sold 529 plans

With direct-sold 529 plans, you’ll likely pay lower fees. It’s also easy to open one online without the help of an advisor.
Unlike advisor-sold 529 plans, a direct-sold plan requires you to pick your own investments. If you don’t want to spend time choosing your investments, see if your chosen 529 plan offers age-based portfolios.

What’s an age-based portfolio for 529 plans?

This portfolio automatically adjusts its investments based on how old the beneficiary is now and when they plan to start college.
The portfolio typically seeks a higher return by investing in riskier instruments like stocks. As the beneficiary gets closer to college age, the portfolio protects your capital by moving the funds into more conservative investments, such as cash and bonds.

How to open a 529 college savings plan

Open a 529 college savings plan in five steps:

  1. Decide on a 529 plan. Research your state’s 529 plan as well as plans from other states. Consider your state’s tax deductions or credits and whether you want an adviser-sold or direct-sold plan.
  2. Choose between an individual and custodial account. An individual account has a parent or grandparent as the account owner, who keeps control of the 529 plan. With a custodial account, the child is both the beneficiary and the account owner. The adult custodian will direct the account until the child becomes an adult.
  3. Complete the application. You’ll need to provide the account owner’s and beneficiary’s Social Security number, address and contact information. If necessary, name a successor account owner in the event of the original owner’s death.
  4. Select investments. You can often choose between actively and passively managed funds.
  5. Fund your 529 plan. Fund your plan with a check, electronic bank transfer and automatic contributions from your bank. Other funding methods may include payroll deduction or a rollover from an existing 529 plan.

What can a 529 plan pay for?

Your beneficiary can make withdrawals tax- and penalty-free for qualified expenses, which are required costs for college enrollment or attendance. But be careful: Many reasonable-sounding expenses don’t qualify.
Below you’ll find a few common qualified and nonqualified expenses.

Equipment, including for special needsYes
Internet accessYes
Non-tuition K-12 expenses, such as books, supplies and tutoringNo
Payments on student loansNo
Room and board, if enrolled at least half-timeYes
Room and board spending that exceeds what the college deems standard for cost of attendanceNo
Sports feesNo
Student health insuranceNo
Transportation spendingNo
Tuition and feesYes
Tuition at public, private and religious K-12 schools (up to $10,000 per year)Yes

What do I do if there’s money left over in my 529 plan?

You can take a non-qualified withdrawal and incur taxes and a penalty.
Or you can change the beneficiary to a cousin, daughter-in-law or even yourself. As long as the beneficiary is an eligible family member, they won’t pay taxes or a penalty.
Another option is to leave the 529 plan as is, since your child may later decide to attend graduate school.

Other college savings accounts

Before deciding on a 529 plan, you may want to consider other college-funding options, including:

  • Coverdell education savings account. This is similar to a 529 plan, except you can use it for a wider variety of K-12 expenses, such as books, supplies and tutoring.
  • Roth IRA. A Roth IRA is a retirement account that grows your contributions tax-free. Normally, you’ll incur taxes and a 10% penalty if you withdraw earnings before you turn 59 and a half. But there’s no penalty when you make withdrawals for qualifying education costs, though you’ll still pay income taxes.
  • High-interest savings account or CD. A high-interest savings account can give you the flexibility to withdraw funds when you need them. You can earn higher interest with a CD, but your money is locked away for a specific time period.

Bottom line

529 plans are a great way to prepare for your child’s college education, especially as contributions grow tax-free.
But if you’re not comfortable putting your college savings at risk, consider savings accounts and other potentially lucrative options.

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