529 Plans by State: Benefits of a College Savings Plan

A 529 college savings account can be a strategic, tax-advantaged way to save for college — and these accounts have only gotten more appealing and flexible in recent years.

A 529 is a tax-advantaged college savings account that can be used to pay for a beneficiary’s qualified education expenses, such as tuition or textbooks. While it was originally limited to higher education, the funds can now be used for kindergarten through grade 12 as well as certified apprenticeship programs and qualified student loan repayments, up to a limit.

There are two main types of 529 plans:

• 529 college savings plans are the most common type and generally considered the best and most flexible 529 option. Investments grow tax-free and can be withdrawn tax-free for educational expenses such as tuition, room and board, and required textbooks.

• 529 prepaid plans let you prepay part or all of an in-state public tuition, locking in the tuition at time of payment.

There are a number of benefits to saving for college in a 529 account, especially when compared with a standard savings account or investment account:

• 529 asset ownership: The money you save in a 529 plan is considered your own asset, rather than an asset of the beneficiary. This arrangement is preferred when it comes to financial aid formulas.

• Tax-deductible contributions: As you can see on the list below, many states offer a state tax deduction for contributing to a 529 plan. This means that in some states, you may be able to deduct 529 contributions — often up to a limit — from income, potentially reducing your state tax burden.

• Simplified investment options: Many 529 plans offer a small selection of age-based investment options, similar to the target-date funds you might be used to seeing in retirement accounts. This makes investing your college savings fairly straightforward.

• Tax-advantaged investment growth: The money you earn by investing your contributions grows tax-deferred, which means it isn't subject to capital gains taxes on an annual basis. And when you use distributions to pay for qualified education expenses, they are tax-free. This means you may never pay taxes on the investment earnings in the account. (However, if you need to take a distribution for a nonqualified expense, you may owe income taxes and 10% penalty on the earnings.)

• Somewhat flexible: You can change the beneficiary on your 529 account, which means if one child decides not to go to college or use the funds for a qualifying expense, you could redirect the funds to another family member. In December 2022, the Secure 2.0 Act added additional flexibility beyond that: Once a 529 account has been open for 15 years, beneficiaries can roll up to $35,000 from the account into their Roth IRA^[0]

  SECURE 2.0 Act of 2022. Expanding Coverage and Increasing Retirement Savings. Accessed Mar 19, 2024.

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  . This is a lifetime limit, but the rollovers count toward Roth IRA annual contribution limits.

» Dive deeper: Read more on 529 plan rules

The best 529 plan for you is going to depend on your investment goals and the state where you live, because these plans can vary widely by state (as can the associated tax benefits for 529 contributions). Start by looking at your state’s plans. Unlike retirement and other investment accounts, 529 savings plans are typically operated by states, which makes searching for the best option fairly easy. If your state offers a tax deduction for contributing, you’ll likely get the most bang for your buck by contributing to its plan.

You don't have to contribute to your state’s plan, though. You’re free to choose any plan you’d like, so it’s worth comparing your options. Plus, some states offer more than one 529 plan to consider.

You can find detailed information about each state's 529 plan below, including the minimum contribution you'll have to make to start an account. We also have a list of 529 contribution limits by state.

Table updated as of July 11, 2024.

This table shows only prepaid plans. Note that the minimum contributions required depend on the cost of a credit or the monthly payment plan. You'll need to check the specific plan for the correct minimum.

Table updated as of July 11, 2024.