Key Tax Benefits of 529 Plans by State

Published By: Chad Silver
Last Updated: October 2, 2023

See More in: Tax Education

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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

Alabama taxpayers can deduct up to $5,000 if filing as an individual or $10,000 for married couples filing jointly every tax year for contributions to their 529 plan.

Alaska

There is no state income tax benefit because Alaska does not charge state income tax.

Arizona

As an Arizona taxpayer, you 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.

Arkansas

Arkansas taxpayers can deduct up to $5,000 as an individual or $10,000 if they are filing jointly jointly every tax year for contributions to their 529 plan.

California

Because California offers no state income tax deduction, there is no state income tax benefit.

Colorado

In Colorado, taxpayers can deduct every dollar they contribute to their 529 plan on their state income tax return.

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.

District of Columbia (Washington, D.C.)

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

Delaware does not offer any state income tax deductions for 529 plan contributions.

Florida

Since Florida does not have a personal income tax, there are no state income tax deductions for a 529 plan.

Georgia

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.

Hawaii

Hawaii offers no state income tax deduction for 529 plan contributions.

Idaho

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

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

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

Iowa taxpayers can deduct up to $3,474 of their contributions per beneficiary in order to determine their adjusted gross income (AGI).

Kansas

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

There are no state income tax benefits.

Louisiana

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

There is no state income tax deduction in Maine.

Maryland

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

Taxpayers 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

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.

Minnesota

Taxpayers 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

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.

Missouri

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

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

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

There is no state income tax.

New Hampshire

There is no state income tax.

New Jersey

New Jersey offers no state income tax deduction for 529 plan contributions.

New Mexico

The 529 contributions are fully deductible from the state income tax.

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.

North Carolina

North Carolina offers no state income tax deduction for 529 plan contributions.

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.

Ohio

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

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

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

Taxpayers can deduct up to $15,000 as an individual or $30,000 if married and filing jointly every tax year for contributions to their 529 plan.

Rhode Island

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

All 529 contributions are tax-deductible.

South Dakota

There is no state income tax.

Tennessee

There is no state income tax.

Texas

There is no state income tax.

Utah

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

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

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

There is no state income tax.

West Virginia

The contributions to a 529 plan are fully deductible when computing the state’s taxable income.

Wisconsin

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

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

If you are considering a 529 plan but not sure where to start. Contact Silver Tax Group today! Our expert tax professionals are ready to answer any questions you might have about 529 plan tax benefits and more.