529 Tax Advantages | Scholar's Edge

Benefit from tax-deferred growth.

Scholar’s Edge 529 Tax Advantages

Growth and distributions

  • 529 account earnings growth is deferred from federal and state income taxes.
  • Account distributions used for qualified education expenses are free from federal taxes and may also be free from state taxes.1

 

State tax benefits

Some states allow for a deduction against state income taxes on contributions.2

States are classified for tax purposes in one of three ways:

  • Tax parity states offer a state tax deduction for any contribution to any 529 plan.
  • Tax neutral states do not offer any state tax deduction for 529 plan contributions.
  • In-state tax benefit states allow state income tax deductions on contributions to in-state 529 plans only.
State Tax Benefit Map

 

 

529 Plan Tax benefits by State, as of January 2020
State Maximum annual state income tax benefit: Individual/Joint Per beneficiary Carry Forward State Tax rate (%) State tax savings ($)
Alabama 5,000/10,000 in state plan No   5.00% $500
Arizona 2,000/4,000 No   3.36% $134
Arkansas 5,000/10,000 in-state; 3,000/6,000 out of state No 4 years 6.90% $690
Colorado Full contribution amount , to extent of taxable income No   4.63% $463
Connecticut 5,000/10,000 in state plan No 5 years 5.00% $500
District of Columbia 4,000/8,000 in state plan No 5 years 8.50% $850
Georgia 4,000/8,000 in state plan Yes   5.75% $460
Idaho 6,000/12,000 in state plan No   6.93% $693
Illinois 10,000/20,000 in state plan No   4.95% $495
Indiana 20% tax credit on contributions up to $5,000 in state plan No   3.23% $1,000
Iowa 3,439/6,878 in state plan Yes   8.53% $587
Kansas 3,000/6,000 Yes   5.70% $342
Louisiana 2,400/4,800 in state plan Yes Unlimited 4.00% $400
Maryland 2,500/5,000 in state plan Yes 10 years 4.75% $475
Massachusetts 1,000/2,000 in state plan No   5.05% $101
Michigan 5,000/10,000 in state plan No   4.25% $425
Minnesota 50% tax credit on contributions up to $500 or state deduction based on contributions of 1,500/3,000 available No   7.05% $212
Mississippi 10,000/20,000 in state plan No   5.00% $540
Missouri 8,000/16,000 No   5.40% $540
Montana 3,000/6,000 No   6.90% $414
Nebraska 10,000/10,000 - 5,000 if married filing separately No   6.84% $684
New Mexico Full contribution amount in state plan No   4.90% $490
New York 5,000/10,000 in state plan No   6.21% $621
North Dakota 5,000/10,000 in state plan No   2.04% $204
Ohio 4,000 in state plan Yes Unlimited 3.96% $396
Oklahoma 10,000/20,000 in state plan Yes 5 years 5.00% $500
Oregon 2,435/4,865 in state plan No 4 years 9.00% $762
Pennsylvania 15,000/30,000 Yes   3.07% $307
Rhode Island 500/1,000 in state plan No Unlimited 4.75% $475
South Carolina Full contribution amount in state plan No   7.00% $700
Utah 5% tax credit on contributions up to 2,000/4,000 in state plan Yes   4.95% $200
Vermont 10% tax credit on contributions up to 2,500/5,000 in state plan Yes   6.60% $500
Virginia 4,000 in state plan; fully deductible if 70 or older Yes Unlimited 5.75% $575
West Virginia Full contribution amount in state plan No 5 years 6.50% $650
Wisconsin 3,280; 1,640 if married filing separately/divorced in state plan Yes Unlimited 6.27% $627

¹ Please note, account distributions not used for qualified education expenses will be subject to federal income taxes on the earnings and a 10% federal tax penalty, as well as state and local income taxes.

² Some states restrict favorable tax treatments to residents who invest in their state's own plan. Before investing through Scholar's Edge, find out if your home state offers any state tax or other benefits that are available only for investments in that state's 529 plan. Source : www.finaid.org, March 2013.