Find the right 529 plan

Grow contributions tax-free and use funds for education expenses.

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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 your rate at current prices.

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.

However, there may be an incentive to invest in your own state’s 529 plan, as your contributions may qualify for a state income tax deduction or a tax credit.

Benefits of 529 plans

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

  • Cover eligible expenses at qualifying colleges. By saving early, you’ll be financially prepared by the time your child goes to college.
  • Use funds for K-12 tuition. Withdraw up to $10,000 a year tax-free to pay for tuition at public, private or religious schools.
  • You won’t pay federal tax on earnings. While you can’t deduct your contributions on your tax report, 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.

HawaiiNone

  • Hawaii’s College Savings Program

N/AN/A

StateTax deduction or creditApplies to…Maximum contribution deduction/credit applies to per yearApplies to contributions to other states’ 529 plans
AlabamaDeduction
  • CollegeCounts 529 Fund
  • $5,000 (individual)
  • $10,000 (married, filing jointly)
No
AlaskaNone
  • University of Alaska College Savings Plan
N/AN/A
ArizonaDeduction
  • Arizona Family College Savings Program
  • Fidelity Arizona College Savings Plan
  • $2,000 (individual)
  • $4,000 (married, filing jointly)
Yes
ArkansasDeduction
  • 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
Yes
CaliforniaNone
  • ScholarShare College Savings Plan
N/AN/A
ColoradoBoth
  • 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
No
ConnecticutDeduction
  • Connecticut Higher Education Trust (CHET)
  • $5,000 (individual)
  • $10,000 (married, filing jointly)

Five-year carryforward for excess contributions

No
DelawareNone
  • Delaware College Investment Plan
N/AN/A
District of ColumbiaDeduction
  • DC College Savings Plan
  • $4,000 (individual)
  • $8,000 (married, filing jointly)

Five-year carryforward for excess contributions

No
FloridaNone
  • Florida 529 Savings Plan
N/AN/A
GeorgiaDeduction
  • Path2College 529 Plan
  • $2,000 per beneficiary (individual)
  • $4,000 per beneficiary (married, filing jointly)
No
IdahoDeduction
  • Idaho College Savings Program (IDeal)
  • $6,000 (individual)
  • $12,000 (married, filing jointly)
No
IllinoisBoth available
  • 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
Yes
IndianaCredit
  • 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
IowaDeduction
  • College Savings Iowa
  • $3,387 per beneficiary (individual)
  • $6,774 per beneficiary (married, filing jointly)
No
KansasDeduction
  • Learning Quest 529 Education Savings Program
  • Schwab 529 College Savings Plan
  • $3,000 per beneficiary (individual)
  • $6,000 per beneficiary (married, filing jointly)
Yes
KentuckyNone
  • Kentucky Education Savings Plan Trust
N/AN/A
LouisianaDeduction
  • 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

No
MaineNone
  • NextGen College Investing Plan
N/AN/A
MarylandDeduction
  • 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

No
MassachusettsDeduction
  • U.Fund College Investing Plan
  • $1,000 (individual)
  • $2,000 (married, filing jointly)
No
MichiganDeduction
  • Michigan Education Savings Program (MESP)
  • $5,000 (individual)
  • $10,000 (married)
No
MinnesotaBoth available
  • Minnesota College Savings Plan
  • Deduction: $1,500 (individual); $3,000 (married, filing jointly)
  • Credit: 50% of contributions, minus withdrawals. $500 maximum
Yes
MississippiDeduction
  • Mississippi Affordable College Savings (MACS) Program
  • $10,000 (individual)
  • $20,000 (married, filing jointly)
No
MissouriDeduction
  • MOST 529 (direct-sold)
  • $8,000 (individual)
  • $16,000 (married, filing jointly)
Yes
MontanaDeduction
  • Achieve Montana
  • $3,000 (individual)
  • $6,000 (married, filing jointly)
Yes
NebraskaDeduction
  • Nebraska Education Savings Trust (NEST) 529
  • TD Ameritrade 529 College Savings Plan
  • $10,000 (individual)
  • $5,000 (married, filing separate returns)
Earnings of rollovers from non-Nebraska plans
NevadaNone
  • Nevada College Savings Plans
N/AN/A
New HampshireNone
  • UNIQUE College Investing Plan
N/AN/A
New JerseyNone
  • NJ BEST College Savings Plan
N/AN/A
New MexicoDeduction
  • The Education Plan
Fully deductibleNo
New YorkDeduction
  • NY 529 Direct Plan
  • $5,000 (individual)
  • $10,000 (married, filing jointly)
No
North CarolinaNone
  • College Foundation of North Carolina
N/AN/A
North DakotaDeduction
  • NC 529 Plan
  • $5,000 (individual)
  • $10,000 (married, filing jointly)
No
OhioDeduction
  • CollegeAdvantage
  • $4,000 per beneficiary (any filing status)

Carryforward for excess contributions applies indefinitely

No
OklahomaDeduction
  • Oklahoma College Savings Plan
  • $10,000 (individual)
  • $20,000 (married, filing jointly)

Five-year carryforward for excess contributions

No
OregonDeduction
  • Oregon College Savings Plan
  • $2,435 (individual)
  • $4,865 (married, filing jointly).

Four-year carryforward for excess contributions

No
PennsylvaniaDeduction
  • Pennsylvania 529 Investment Plan
  • $15,000 per beneficiary (individual)
  • $30,000 per beneficiary (married, filing jointly)
Yes
Rhode IslandDeduction
  • CollegeBound Saver (direct-sold)
  • $500 (individual)
  • $1,000 (married, filing jointly).

Carryforward for excess contributions applies indefinitely

No
South CarolinaDeduction
  • Future Scholar 529 College Savings Plan (direct-sold)
Fully deductibleNo
South DakotaNone
  • College Access 529
N/AN/A
TennesseeNone
  • TN Stars College Savings 529 Program
N/AN/A
TexasNone
  • Texas College Savings Plan
N/AN/A
UtahCredit
  • my529
  • 5% credit on up to $2,000 in contributions per beneficiary (individual)
  • $4,000 per beneficiary (married, filing jointly)
  • Maximum annual credit of $100 per beneficiary (individual) or $200 per beneficiary (married, filing jointly)
No
VermontCredit
  • Vermont Higher Education Investment Plan
  • 10% credit on up to $2,500 in contributions per beneficiary (individual)
  • $5,000 per beneficiary (married, filing jointly)
  • Maximum annual credit of $250 per beneficiary (individual) or $500 per beneficiary (married, filing jointly)
No
VirginiaDeductible
  • Invest529
  • $4,000 per account

Carryforward for excess contributions applies indefinitely

No
WashingtonNone
  • DreamAhead College Investment Plan
N/AN/A
West VirginiaDeductible
  • SMART529 Select
  • SMART529 WV Direct College Savings Plan
Fully deductibleNo
WisconsinDeductible
  • Edvest
  • $3,280 per beneficiary

Excess-contribution carryforward for one or more future years

Rollovers from non-Wisconsin 529 plans
WyomingNone
  • No state plan
N/AN/A

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 May 31
  • $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 non-qualified 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.

Advisor-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 advisor or directly through a 529 provider.

Advisor-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 advisor 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:

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 non-qualified expenses.

ExpenseQualified?
BooksYes
ComputersYes
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
SuppliesYes
Transportation spendingNo
Tuition and feesYes
Tuition at public, private and religious K-12 schools (up to $10,000 per year)Yes

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 certain period of time.

How to compare college savings accounts

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.

Frequently asked questions

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