Which States Are The Best & Worst For 529 Plans in 2025?
We took a look at the best and worst states for 529 plans, tax deductions and flexibility.
States like Colorado, New Mexico, and South Carolina rank at the top with their full tax deductions for all 529 contributions, providing serious tax savings.
Pennsylvania also offers a pretty competitive advantage, allowing deductions up to $30,000 for married filers per beneficiary, making it highly favorable for families.
On the other hand, states like California, Delaware, and New Jersey offer no state tax benefits, limiting their appeal despite access to federal tax advantages.
Then, there are states without income taxes, such as Florida and Texas. These states lack deductions (since you aren’t paying any state taxes anyway) but still allow residents to benefit from federal perks like tax-free growth.
College is expensive, but saving for it can quickly become an overwhelming and tedious task. Did you know there are numerous 529 plan tax benefits that can impact how you save for college? Unfortunately, most people are completely unaware of what these plans can do for their children — or how to make the most from this type of savings.
Knowing your options (and how the state you live in impacts those options), you can start investing in your child’s future in no time, ensuring you are getting the biggest bang for your invested buck and allowing you to plan your taxes accordingly. This guide will discuss what a 529 plan is as well as the tax benefits these plans can provide you and your offspring.
529 Plans: The Basics
A 529 plan is a tax-advantaged investment medium designed to encourage saving for higher education expenses. These plans are generally considered a college savings plan that offers financial aid benefits and tax benefits, but college costs are not it’s only use: 529 plan funds can also be used to save for K-12 tuition.
There are two major types of 529 plans: prepaid tuition plans and college savings plans. College savings plans tend to grow tax-deferred, with withdrawals being tax-free if used for a qualified education expense, while the prepaid plans allow the account owner to pay in advance for tuition. This can lock in ever-growing college cost at today’s rates.
A State-by-State Breakdown of 529 Plan Tax Benefits
The 529 plan is administered by all 50 states, including the District of Columbia. Anyone can open a 529 account, but they are usually established by parents or grandparents of a child. The tax benefits of setting one up differ by state, however, so it is important to understand the implications for the state you live in.
Here’s what you need to know about your state-level benefits of setting up a 529 plan:
Alabama 529 Tax Deduction
Alabama allows residents to deduct up to $10,000 per year for individual tax filers and up to $20,000 for married couples filing jointly when contributing to a 529 college savings plan. This state tax deduction applies to contributions made to both Alabama’s CollegeCounts 529 plan and other states’ 529 plans.
Alaska 529 Tax Deduction
Alaska does not offer a state tax deduction for 529 plan contributions, since the state has no income tax. However, residents can still open and contribute to 529 plans to receive federal tax benefits, such as tax-free growth and withdrawals for qualified education expenses.
Arizona 529 Tax Deduction
Arizona taxpayers can deduct up to $2,000 as an individual or $4,000 for a married couple filing jointly every tax year for contributions to their 529 plan. This tax benefit applies to contributions made to any state’s 529 plan, not just Arizona’s plans, and residents don’t need to use the funds at Arizona schools. Additionally, grandparents and other family members who contribute to a 529 plan can claim this deduction on their Arizona state taxes, within the same limits.
Arkansas 529 Tax Deduction
Arkansas taxpayers can deduct up to $5,000 as an individual or $10,000 if they are filing jointly every tax year for contributions to their 529 plan. The deduction applies specifically to contributions made to Arkansas’s 529 plan (the GIFT Plan or iShares 529 Plan), and contributions above these limits can be carried forward to future tax years. Arkansas residents must keep their money in the account for at least one year to maintain the tax deduction benefit.
California 529 Tax Deduction
California offers no state income tax deduction for 529 plan contributions, so residents receive no state tax benefit for contributing to these college savings accounts. However, California residents can still take advantage of federal tax benefits like tax-free growth and withdrawals for qualified education expenses when using 529 plans, including California’s ScholarShare 529 plan.
Colorado 529 Tax Deduction
In Colorado, taxpayers can deduct every dollar they contribute to their 529 plan on their state income tax return. This full deduction applies to contributions made to any state’s 529 plan, not just Colorado’s CollegeInvest plans, and there is no annual limit to how much Colorado residents can deduct, making it one of the most generous 529 tax benefits in the country.
Connecticut 529 Tax Deduction
Connecticut taxpayers can deduct up to $5,000 as an individual or $10,000 for married couples filing jointly every tax year for contributions to their 529 plan. The deduction only applies to contributions made to Connecticut’s CHET 529 plan, and any contributions exceeding these limits in a given year cannot be carried forward to future tax years. Connecticut residents should note that withdrawals for non-qualified expenses may result in taxes plus a 10% penalty on the earnings.
District of Columbia (Washington, D.C.) 529 Tax Deduction
Taxpayers can deduct up to $4,000 as an individual or $8,000 for married couples filing jointly every tax year for contributions to their 529 plan. In addition, any excess contributions can be carried over and deducted in future years.
Delaware 529 Tax Deduction
Delaware does not offer any state income tax deductions for 529 plan contributions. However, Delaware residents can still benefit from federal tax advantages when using 529 plans, including tax-free investment growth and withdrawals for qualified education expenses. Delaware residents are free to invest in any state’s 529 plan while receiving these federal benefits.
Florida 529 Tax Deduction
Since Florida does not have a personal income tax, there are no state income tax deductions for a 529 plan. That being said, Florida residents can still open and contribute to any state’s 529 plan to receive federal tax benefits, including tax-free earnings growth and withdrawals for qualified education expenses, plus Florida’s Prepaid College Plan offers tuition protection by locking in current rates for future education costs.
Georgia 529 Tax Deduction
In Georgia, taxpayers can deduct up to $4,000 as an individual or $8,000 if they are married filing jointly every tax year for contributions to their 529 plan. This deduction applies only to contributions made to Georgia’s Path2College 529 Plan, and while contributions above these limits cannot be carried forward to future tax years, each beneficiary can have their own account with separate deduction limits for contributions from different taxpayers.
Our Atlanta tax attorneys can help you properly document and claim these 529 plan deductions on your Georgia state tax returns, while also reviewing potential tax strategies to maximize both state and federal benefits from your educational savings.
Hawaii 529 Tax Deduction
Hawaii offers no state income tax deduction for 529 plan contributions.
Idaho 529 Tax Deduction
Taxpayers in Idaho can deduct up to $6,000 as an individual or $12,000 as a married couple filing jointly every tax year for contributions to their 529 plan.
Illinois 529 Tax Deduction
Illinois taxpayers can deduct up to $10,000 as an individual or $20,000 if filing jointly every tax year for contributions to their 529 plan.
Indiana 529 Tax Deduction
In Indiana, taxpayers are eligible for a state income tax credit of 20% of all their contributions to their 529 plans, up to $1,000 per year.
Iowa 529 Tax Deduction
Iowa taxpayers can deduct up to $3,474 of their contributions per beneficiary in order to determine their adjusted gross income (AGI).
Kansas 529 Tax Deduction
Taxpayers in Kansas can deduct up to $3,000 as an individual or $6,000 for a married couple filing jointly every tax year for contributions to their 529 plan.
Kentucky 529 Tax Deduction
In Kentucky, taxpayers can deduct up to $10,000 as an individual or married filing jointly every tax year for contributions to their 529 plan. This deduction applies to contributions made to both Kentucky’s KY Saves 529 plan and any other state’s 529 plan, though contributions above this limit cannot be carried forward to future tax years. We can guide you through claiming these 529 plan deductions on your Kentucky state tax returns and help structure your educational savings to maximize available tax benefits on every level.
Louisiana 529 Tax Deduction
Taxpayers can deduct up to $2,400 as an individual or $4,800 if filing jointly every tax year for contributions to their 529 plan. If taxpayers do not use their full deduction, they can roll over any unused deduction to future tax years.
Maine 529 Tax Deduction
In Maine, taxpayers can contribute up to $100,000 per beneficiary per year to their 529 plan. While Maine offers no state income tax deduction for 529 plan contributions, it provides a unique matching grant program through the NextGen 529 plan – eligible Maine residents can receive a $200 initial matching grant, plus up to $100 in annual matching grants for ongoing contributions. Another cool thing is that Maine babies born as residents get a $500 grant automatically deposited into a NextGen 529 account.
Maryland 529 Tax Deduction
Taxpayers can deduct up to $2,500 as an individual or $5,000 if married and filing jointly every tax year for contributions to their 529 plan. Contributions that total more than $2,500 per beneficiary may be deducted for up to 10 years.
Massachusetts 529 Tax Deduction
Taxpayers in MA can deduct up to $1,000 as an individual or $2,000 if married and filing jointly every tax year for contributions to their 529 plan.
Michigan 529 Tax Deduction
Taxpayers in Michigan can deduct up to $5,000 as an individual or $10,000 if married and filing jointly every tax year for contributions to their 529 plan. This deduction applies only to contributions made to Michigan’s Education Savings Program (MESP) or Michigan Education Trust (MET) plans, and contributions above these limits cannot be carried forward to future tax years.
Our Detroit tax attorneys can help you properly claim these 529 plan deductions on your Michigan state tax returns and identify additional tax strategies for maximizing the benefits of your educational savings.
Minnesota 529 Tax Deduction
Taxpayers in MN can deduct up to $1,500 as an individual or $3,000 if married and filing jointly every tax year for contributions to their 529 plan.
Mississippi 529 Tax Deduction
Taxpayers are able to deduct up to $10,000 as an individual or $20,000 if married and filing jointly every tax year for contributions to their 529 plan.
Missouri 529 Tax Deduction
Taxpayers can deduct up to $8,000 as an individual or $16,000 if married and filing jointly every tax year for contributions to their 529 plan.
Montana 529 Tax Deduction
Taxpayers can deduct up to $3,000 as an individual or $6,000 if married and filing jointly every tax year for contributions to their 529 plan.
Nebraska 529 Tax Deduction
Taxpayers can deduct up to $10,000 as individuals or $5,000 if married taxpayers are filing separate returns every tax year for contributions to their 529 plan.
Nevada 529 Tax Deduction
Nevada does not offer state tax deductions for 529 plan contributions since the state has no income tax. However, Nevada residents can still invest in any state’s 529 plan, including Nevada’s own Vanguard 529 College Savings Plan, to receive federal tax benefits such as tax-free growth and withdrawals for qualified education expenses. The Nevada state treasurer also offers the Silver State Matching Grant Program, which matches up to $300 in contributions annually for eligible families.
New Hampshire 529 Tax Deduction
Since New Hampshire has no state income tax (it only taxes investment income and dividends), there are no state tax deductions available for 529 plan contributions. However, New Hampshire residents can still open and contribute to any state’s 529 plan to receive federal tax benefits, including tax-free investment growth and withdrawals for qualified education expenses.
New Jersey 529 Tax Deduction
New Jersey does not offer state tax deductions for 529 plan contributions. However, New Jersey residents can still contribute to any state’s 529 plan – including New Jersey’s NJBEST plan – to receive federal tax benefits such as tax-free growth and withdrawals for qualified education expenses. NJBEST also provides a scholarship of up to $3,000 for beneficiaries who attend New Jersey colleges.
New Mexico 529 Tax Deduction
In New Mexico, taxpayers can deduct the full amount of their 529 plan contributions from their state taxable income, with no annual limit. This generous deduction applies to contributions made to any state’s 529 plan, not just New Mexico’s Education Plan, making it one of the most favorable states for college savings tax benefits. Additionally, New Mexico residents can claim this deduction even for contributions made to another state’s 529 plan.
New York 529 Tax Deduction
In New York, taxpayers can deduct up to $5,000 as an individual or $10,000 if married and filing jointly every tax year for contributions to their 529 plan. This deduction applies only to contributions made to New York’s 529 plans (the Direct Plan or Advisor-Guided Plan), and contributions above these limits cannot be carried forward to future tax years.
New York residents should note that withdrawals for non-qualified expenses may require them to pay back any previous tax benefits received.
North Carolina 529 Tax Deduction
North Carolina currently offers no state tax deductions for contributions to 529 plans, after eliminating this benefit in 2014. However, North Carolina residents can still open and contribute to any state’s 529 plan, including North Carolina’s National College Savings Program, to receive federal tax benefits such as tax-free investment growth and withdrawals for qualified education expenses.
North Dakota 529 Tax Deduction
In North Dakota, taxpayers can deduct up to $5,000 as an individual or $10,000 if married and filing jointly every tax year for contributions to their 529 plan. This tax deduction applies only to contributions made to North Dakota’s College SAVE plan, not to other states’ plans, and contributions above these limits cannot be carried forward to future tax years.
The state also offers matching grants of up to $300 per year for eligible residents who contribute to College SAVE accounts.
Ohio 529 Tax Deduction
Taxpayers can deduct up to $4,000 as an individual or $4,000 if filing jointly per beneficiary, with unlimited carryforward of excess contributions, every tax year for contributions to their 529 plan.
Oklahoma 529 Tax Deduction
Taxpayers can deduct up to $10,000 as an individual or $20,000 if married and filing jointly every tax year for contributions to their 529 plan.
In addition, any contribution above this amount can be deducted over the following five tax years.
Oregon 529 Tax Deduction
All Oregon taxpayers can receive a state income tax credit up to $150 for single filers and $300 for joint filers with an adjusted gross income less than $30,000.
Pennsylvania 529 Tax Deduction
In Pennsylvania, taxpayers can deduct up to $15,000 per beneficiary as an individual or $30,000 if married and filing jointly every tax year for contributions to their 529 plan. This tax benefit stands out because Pennsylvania allows the deduction for contributions to any state’s 529 plan, not just Pennsylvania’s PA 529 plans, and each beneficiary can have multiple accounts with separate deduction limits.
What makes it even better is that grandparents and other relatives can claim deductions for their contributions to these accounts.
Rhode Island 529 Tax Deduction
Taxpayers are eligible for a tax deduction of up to $500 as an individual or $1,000 for married couples filing jointly every tax year for contributions to their 529 plan. However, certain contributions made beyond annual limits can be deducted in future years.
South Carolina 529 Tax Deduction
In South Carolina, taxpayers can deduct their entire 529 plan contribution from their state taxable income, with no annual limit. This complete deduction applies only to contributions made to South Carolina’s Future Scholar 529 plan, not to other states’ plans, and residents can claim the deduction for each account they contribute to during the tax year. The state also lets taxpayers deduct any contributions until the tax filing deadline of the following year.
South Dakota 529 Tax Deduction
Since South Dakota has no state income tax, there are no state tax deductions available for 529 plan contributions. However, South Dakota residents can still open and contribute to any state’s 529 plan, including South Dakota’s CollegeAccess 529 plan, to receive federal tax benefits such as tax-free investment growth and withdrawals for qualified education expenses.
Tennessee 529 Tax Deduction
Because Tennessee does not have a state income tax (it previously taxed only investment income and dividends until 2021), there are no state tax deductions available for 529 plan contributions. However, Tennessee residents can still open and contribute to any state’s 529 plan, including Tennessee’s TNStars College Savings 529 program, to receive federal tax benefits such as tax-free investment growth and withdrawals for qualified education expenses.
Texas 529 Tax Deduction
Since Texas has no state income tax, there are no state tax deductions available for 529 plan contributions. However, Texas residents can still open and contribute to any state’s 529 plan, including Texas’s two plans (the Texas College Savings Plan and the LoneStar 529 Plan), to receive federal tax benefits such as tax-free investment growth and withdrawals for qualified education expenses.
Utah 529 Tax Deduction
In Utah, contributions to the 529 plan of up to $2,040 as an individual or $4,080 by a married couple filing jointly are eligible for a 5% credit against the Utah income tax.
Vermont 529 Tax Deduction
Vermont taxpayers who contribute to the 529 plan are eligible for a state income tax credit of 10% of the first $2,500 put into the fund ($250 per beneficiary). Married couples who are filing jointly can also receive the same tax credit for the first $5,000 in contributions ($500 per beneficiary).
Virginia 529 Tax Deduction
Virginia taxpayers who have a 529 account may deduct contributions up to $4,000 per account per year with an unlimited carry forward to future tax years, subject to some restrictions.
Washington State 529 Tax Deduction
Since Washington state has no income tax, there are no state tax deductions available for 529 plan contributions. However, Washington residents can still open and contribute to any state’s 529 plan, including Washington’s DreamAhead College Investment Plan and Guaranteed Education Tuition (GET) Program, to receive federal tax benefits such as tax-free investment growth and withdrawals for qualified education expenses.
West Virginia 529 Tax Deduction
The contributions to a 529 plan are fully deductible when computing the state’s taxable income.
Wisconsin 529 Tax Deduction
Taxpayers can deduct up to $3,340 if filing as an individual or $3,340 if married and filing jointly every tax year for contributions to their 529 plan.
Wyoming 529 Tax Deduction
There is no state income tax.
Understanding the benefits in your state can go a long way toward maximizing your 529 plan’s benefits. Work with a trusted advisor to make sure you understand the tax implications of your plan and what you can and cannot claim on your annual tax return.
Ask a Tax Lawyer about Tax Benefits of 529 Plans in Your State
Considering a 529 plan but not sure how to navigate the tax implications? Silver Tax Group is here to guide you through every step. A 529 plan can be a powerful tool for funding education while offering tax advantages, such as tax-free growth and withdrawals for qualified expenses. However, improper handling can lead to penalties, taxes on earnings, or even missed opportunities for additional state tax benefits.
Our tax attorneys will ensure that your 529 contributions, withdrawals, and reporting comply with IRS requirements while maximizing available benefits. We’ll help you understand complex rules like rollover provisions, contribution limits, and potential gift tax implications.
Trying to handle this on your own or with generic tax preparers? You risk costly mistakes, such as failing to report non-qualified withdrawals correctly, overlooking deductions or credits, or even triggering an audit. With Silver Tax Group, you gain the legal expertise needed to avoid these pitfalls and secure the best outcome.
Contact us today, and let’s make your 529 plan work harder for you.
