Tax deductions for 529 plan contributions by state

One of the big advantages of using a 529 plan to save for college is that many states offer it Tax deductions for 529 plan contributions. Other states offer tax breaks, and some even allow contributions to any state’s plan (this is called tax parity). But, like anything else, there are rules that apply.

Some states require you to contribute to their state plan, while others allow you to take a tax deduction for contributions to any state’s plan. Finally, there are (unfortunately) countries that do not offer any incentives for contributions.

Withdrawal rules can also affect your taxes. Make sure you understand the differences in qualified withdrawals for a 529 plan so you don’t pay taxes and penalties!

A 529 plan allows you to contribute money for educational use. The funds must be used for education, which includes college tuition or K-12 education.

The account owner remains in control of the account, while the funds are used for the benefit of the beneficiary (usually a child). This is different from a UGMA or UTMA account, which allows the beneficiary to take control of the account once they reach legal age.

Related to: What is a 529 plan?

Many 529 plans offer state tax deductions on contributions. Some states even offer a tax credit. But not every state offers the discount. In addition, there are certain rules you have to follow.

For example, most states only give you a tax credit or tax deduction if you contribute to your state’s plan. However, some states offer “parity,” which means allowing you to get a tax deduction regardless of which state plan you contribute to.

529 plans do not offer tax deductions for federal contributions.

You can open a 529 plan with your brokerage or by searching for a 529 plan. Once you find a plan you like, you’ll choose an in-state or out-of-state plan. After opening the account, you can then choose one of the investment options offered by the plan.

Check out this list here and learn where to open a 529 plan that works best for you:

For most states, you must contribute to your state’s 529 plan (as opposed to an out-of-state plan) to receive any state tax benefit. However, seven states offer tax parity, allowing you to contribute to any of the 529 states’ plans.

529 tax parity countries

These seven states that offer a tax deduction for contributions to any state plan include:

• Arizona: 2000 US dollars for a single person or head of a family, and 4000 US dollars for joint files
• Arkansas: $5,000 for single applicants, and $10,000 for married couples
• Kansas: $3,000 for single applicants, and $6,000 for married couples
• Minnesota: $1,500 for single applicants, and $3,000 for married couples
• Missouri: $8,000 for individual filers, and $16,000 for joint filers
• Montana: $3,000 for individual filers, and $6,000 for joint filers
• Pennsylvania: $19,000 for individual filers, and $38,000 for joint filers

529 states tax deduction plan

The following states offer discounts:

• Alabama: $5,000 for individual filers, and $10,000 for joint filers
• Colorado: $25,400 for single applicants, and $38,100 for married couples
• Connecticut: $5,000 for single applicants, and $10,000 for married couples
• Delaware: $1000 for individual files, $2000 for joint files
• Georgia: $4,000 for individual filers, and $8,000 for joint filers
• Idaho: $6,000 for individual filers, and $12,000 for joint filers
• illinois: $10,000 for individual depositors, and $20,000 for joint depositors.
• yeah: US$5,800 for individual filers, and US$11,600 for joint filers.
• Louisiana: US$2,400 for individual depositors, and US$4,800 for joint depositors.
• who: $1000 per beneficiary
• Maryland: $2,500 per beneficiary
• Massachusetts: $1,000 for individual depositors, and $2,000 for joint depositors
• Michigan: $5,000 for individual filers, and $10,000 for joint filers
• Mississippi: $10,000 for individual depositors, and $20,000 for joint depositors.
• nebraska: US$10,000 for individuals and married couples, and US$5,000 if filing separately.
• New Jersey: $10,000 per taxpayer per year
• New Mexico: The full contribution amount without limits
• New York: $5,000 for individual filers, and $10,000 for joint filers
• North Dakota: $5,000 for individual filers, and $10,000 for joint filers
• Ohio: $4,000 per year regardless of application status
• Oklahoma: $10,000 for individual depositors, and $20,000 for joint depositors.
• rhode island: $500 for individual files, and $1000 for joint files
• South Carolina: The full contribution amount without limits
• Virginia: $4,000 per year regardless of application status
• Washington, DC: $4,000 for individual filers, and $8,000 for joint filers
• West Virginia: The full contribution amount without limits
• wisconsin: $5,130 per dependent beneficiary, himself or his or her grandchild

529 plan tax credit states

The following states offer tax breaks:

• Indiana: A 20% tax deduction on contributions up to $1,500
• Oregon: $180 for individual files, $360 for shared files
• Utah: 4.5% of the contribution, up to $112.05 for single applicants, and $224.10 for married applicants
• Vermont: 10% tax credit, up to $250 for single filers, $500 for married filers

No. 529 tax benefit plan

If your state does not have an income tax, the tax deduction for a 529 plan will not apply. These states include:

Some states have income taxes but no tax deduction for a 529 plan. They include:

Find your state’s full 529 plan guide here >>

If you want to control the money you put toward your beneficiary’s college tuition, then yes — it’s worth it. Make sure the money will eventually be used for education. If not, you will incur a 10% penalty, plus you will be taxed at your ordinary income tax rate for non-educational use of the funds.