529 Plans 101
In many states, by contributing to your 529 account, you are eligible for these major tax deductions.
Read more here!
529 Savings Plans are designed by states to provide tax-advantage means of saving for eligible education expenses.
Contributions are made with after-tax dollars and grow tax deferred. If the money is used for qualified education expenses, withdrawals are tax free.
Under securities laws, these plans are structured as municipal fund securities and therefore many states also offer tax deductions for contributions to 529 Plans.
That’s right- you can claim these contributions to get a tax break. And depending upon the investor’s tax bracket, the municipal bond may result in higher returns on an after-tax basis.
Keep reading to learn more…
🏛️ Federal 529 Plan Contribution Rules (2025)
In 2025, individuals can contribute up to $19,000 per beneficiary to a 529 plan without triggering federal gift taxes, while married couples filing jointly can contribute up to $38,000. The IRS also allows an accelerated gifting option, enabling individuals to front-load up to five years' worth of contributions. That means a single filer can contribute up to $95,000 per beneficiary in a single year, or $190,000 for a married couple, without incurring gift tax implications—provided no other gifts are made to that beneficiary during the five-year period.
Additionally, the lifetime federal gift and estate tax exemption has increased to $13.99 million per individual (or $27.98 million per couple). It's important to note that while 529 contributions grow tax-free and qualified withdrawals are not taxed at the federal level, there is no federal income tax deduction for contributions.
State-by-State Overview of 529 Plan Tax Deductions and Contribution Limits (2025)
Your 529 state tax deduction amount will depend on where you live and how much you contribute to a 529 college savings plan during a given tax year so check the table below to see your eligibility:
* Nine tax parity states offer a state income tax benefit for contributions to any 529 plan and not only in-state plans including: Arizona, Arkansas, Kansas, Maine, Minnesota, Missouri, Montana, Ohio, and Pennsylvania.
If you live in one of these states, you can consider an out-of-state plan for your own investments or contribute to a loved one’s out-of-state plan to receive the deduction.
Unfortunately the 9 states with no income tax do not offer 529 deductions including: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
The three states which do charge income tax, but do not offer any state income tax deductions on contributions are California, Hawaii, and Kentucky.
As seen above, not all states offer state income tax deductions on 529 plan contributions. So, if you fall within one of these states you cannot reduce your taxes by putting money into your savings plan. However, they do provide tax free growth on investments within the plan, meaning any earnings on the investments won’t be taxed!
For more information about your state’s specific tax deduction for 529 contributions, you could visit the official website of your state’s Department of Revenue or Department of Taxation.
This information is general in nature and is not intended to serve as the primary or sole basis for investment or tax-planning decisions.