529 Plan State-by-State Comparison Guide
A 529 plan is a tax-advantaged savings account for education expenses. You can invest in any states plan, but the state where you pay income tax may offer a deduction for contributing to its own plan.
How 529 Plans Work
529 plan contributions grow tax-free and withdrawals are tax-free when used for qualified education expenses — tuition, fees, room and board, textbooks, computers, and internet access. The SECURE 2.0 Act (2024) also allows unused 529 funds (up to $35,000 per beneficiary) to be rolled into the beneficiarys Roth IRA without penalty. Contributions are made with after-tax dollars. Most plans offer age-based portfolios (automatically shift from stocks to bonds as the beneficiary approaches college age) and static portfolios (fixed allocation you choose).
States with Income Tax Deductions for 529 Contributions
Over 30 states offer a full or partial state income tax deduction for 529 contributions. Key highlights: New York: Deduct up to $5,000 ($10,000 married filing jointly) per beneficiary. No recapture if you later withdraw for non-qualified expenses. Illinois: Deduct up to $10,000 ($20,000 married) per beneficiary. Most generous for families with multiple children. Ohio: Deduct up to $4,000 per beneficiary (per account owner). Michigan: Deduct up to $5,000 ($10,000 married) per beneficiary. Colorado: Deduct unlimited contributions — you can deduct any amount. Virginia: Deduct up to $4,000 per account. Maryland: Deduct up to $2,500 per beneficiary. Oregon: Offers a 1% tax credit on contributions (credit is more valuable than a deduction).
No state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming. If you live in one of these states, there is no tax benefit to choosing your own states plan — choose the lowest-cost plan nationally.
No deduction but good in-state plans: California (no state deduction but ScholarShare 529 is competitive), Vermont (no deduction, offers a matching grant instead).
Best National Plans (Available to Any State Resident)
If your state does not offer a tax deduction, or if the deduction is small enough that a lower-cost out-of-state plan beats the in-state benefit, consider these top-rated national plans: Utah my529: Consistently rated #1. Lowest fees in the nation (0.10%-0.13% expense ratios). Excellent age-based options using Vanguard and Dimensional Fund Advisors portfolios. No state income tax benefit (Utah offers a 5% tax credit capped at $484 — minimal). Nevada Vanguard 529: Managed by Vanguard. Fees as low as 0.12%. Broad investment options including Vanguard index funds. No state income tax anyway. New York 529 Direct Plan: Low fees (0.12%). Vanguard index fund portfolios. NY residents get the $5,000 deduction, but out-of-state investors can still benefit from low fees. California ScholarShare 529: Low fees (0.14%). TIAA-managed age-based portfolios. Unlimited contribution limit ($529,000+). Good option for all states.
Choosing Between Your State's Plan and a National Plan
Compare your states tax benefit against the fee difference. If your state offers a $5,000 deduction at a 5% tax rate, that saves you $250/year. If your in-state plan charges 0.40% fees and the best national plan charges 0.12%, the fee difference on a $50,000 account is $140/year. In this case, the in-state plan wins until the account grows large enough that fee savings exceed the tax deduction. Formula: Deduction amount × your tax rate > account balance × fee difference = use in-state; otherwise use the national plan.
SECURE 2.0 Roth IRA Rollover
Since 2024, you can roll over up to $35,000 from a 529 plan to the beneficiarys Roth IRA without penalty, subject to: (1) the 529 plan must have been open for at least 15 years, (2) the rollover counts toward the annual Roth IRA contribution limit ($7,000 in 2026), (3) the beneficiary must have earned income equal to or greater than the rollover amount, (4) the $35,000 cap is a lifetime limit, and (5) contributions made in the last 5 years (and earnings on those contributions) are not eligible for rollover. This dramatically reduces the risk of overfunding a 529 plan — if your child does not need all the funds for education, up to $35K can become their retirement savings.
Key Takeaways
- Use your own states 529 plan if it offers a meaningful tax deduction — factor in fee differences
- If your state has no income tax or no deduction, choose the lowest-cost plan nationally (Utah my529, Nevada Vanguard)
- Age-based portfolios are the simplest option — they automatically rebalance from stocks to bonds as college approaches
- SECURE 2.0 Roth rollover (up to $35K) reduces the risk of overfunding — the money is not trapped
- 529 funds can now be used for K-12 tuition ($10K/year) and apprenticeship programs, not just college
- You can change beneficiaries without penalty to another family member