529 College Savings Plans: State Tax Benefits & Reporting Guide for Taxpayers

Saving for education can feel like a daunting task, but a 529 plan makes it easier by offering tax benefits. Whether you’re saving for a child, grandchild, or even yourself, a 529 plan helps you grow your savings while also offering state-specific tax advantages. This guide will explain the basics of 529 plans and walk you through the tax benefits available in your state.

What Is a 529 Plan?

A 529 plan is a tax-advantaged savings account designed to help families save for education expenses. The money in the account grows tax-free, and you can make tax-free withdrawals for qualified education expenses like tuition, books, and housing. Every state has its own 529 plan, and many offer additional state tax benefits to help you save even more.

Key Tax Benefits of 529 Plans

The primary benefit of a 529 plan is that it allows your savings to grow tax-free. Withdrawals are also tax-free as long as they are used for qualified education expenses. Additionally, many states offer tax deductions or credits on contributions made to a 529 plan. While contributions are not deductible on federal taxes, more than 30 states offer state-level tax
benefits, which can reduce your taxable income and boost your savings.

How to Report 529 Contributions on Your Taxes

The way you report your 529 contributions depends on your state’s tax rules. Some states allow you to deduct your contributions on your state income tax return, while others provide a tax credit. The contributions are typically reported on a specific form or schedule. For example, in Alabama, contributions are reported on Schedule A, while in Arizona, they are reported on Form 309. Be sure to check the tax forms required for your state, as outlined below.

State-by-State Breakdown of 529 Tax Benefits

Here’s a quick look at some states and their 529 tax benefits:

• Alabama: Deduct up to $5,000 (single) or $10,000 (joint) on Schedule A, line 7 of Form 40.
• Arizona: Deduct up to $2,000 (single) or $4,000 (joint) on Form 309, which flows to Form 140.
• Arkansas: Deduct up to $5,000 (single) or $10,000 (joint) on AR1000ADJ, line 23.
• California: No state tax benefits for 529 contributions.
• Colorado: Full deduction for contributions on Schedule A, line 8.
• Connecticut: Deduct up to $5,000 (single) or $10,000 (joint) on Schedule 1 of Form CT-1040.
• Delaware: No state tax benefits for 529 contributions.
• Florida: No state income tax; no state tax deduction.
• Georgia: Deduct up to $4,000 (single) or $8,000 (joint) on Form 500, Schedule 1, line 12.
• Hawaii: Deduct up to $5,000 (single) or $10,000 (joint) on Hawaii Form N-11, line 21.
• Idaho: Deduct up to $6,000 (single) or $12,000 (joint) on Form 39R, line 13.
• Illinois: Deduct up to $10,000 (single) or $20,000 (joint) on Schedule M, which flows to Form IL-1040.
• Indiana: 20% tax credit on contributions up to $5,000 (maximum credit of $1,000). Report on Schedule IN-529, which flows to Form IT-40.
• Iowa: Deduct up to $3,474 (single) or $6,948 (joint) on IA 1040, Schedule A, line 24.
• Kansas: Deduct up to $3,000 (single) or $6,000 (joint) per beneficiary on K-40, line 2.
• Kentucky: No state tax benefits for 529 contributions.
• Louisiana: Deduct up to $2,400 (single) or $4,800 (joint) per beneficiary on Schedule E, flowing to Form IT-540.
• Maine: No state tax benefits for 529 contributions.
• Maryland: Deduct up to $2,500 per beneficiary per year. Include contributions on Form 502, line 13.
• Massachusetts: Deduct up to $1,000 (single) or $2,000 (joint) on Schedule Y, flowing to Form 1, line 15.
• Michigan: Deduct up to $5,000 (single) or $10,000 (joint) on Schedule 1, flowing to MI-1040, line 25.
• Minnesota: Deduct up to $1,500 (single) or $3,000 (joint), or claim a tax credit up to $500, depending on income. Report on Schedule M1529, which flows to Form M1.
• Mississippi: Deduct up to $10,000 (single) or $20,000 (joint) on Schedule P, flowing to Form 80-108, line 4.
• Missouri: Deduct up to $8,000 (single) or $16,000 (joint) on MO-A, Part 1, line 5.
• Montana: Deduct up to $3,000 (single) or $6,000 (joint) on Montana Form 2, line 17.
• Nebraska: Deduct up to $10,000 (joint) or $5,000 (single) on Nebraska Schedule I, line 12.
• Nevada: No state income tax; no state tax deduction.
• New Jersey: Deduct up to $5,000 (single) or $10,000 (joint) on NJ-1040, Schedule B, line 6.
• New Mexico: Full deduction for all contributions. Report on PIT-ADJ, line 5.
• New York: Deduct up to $5,000 (single) or $10,000 (joint) on IT-201, line 30.
• North Carolina: No state tax benefits for 529 contributions.
• North Dakota: Deduct up to $5,000 (single) or $10,000 (joint) on Schedule ND-1SA, line 8.
• Ohio: Deduct up to $4,000 per beneficiary, with unlimited carryover for excess contributions, on Ohio Schedule A, line 34.
• Oklahoma: Deduct up to $10,000 (single) or $20,000 (joint) on Form 511, line 21.
• Oregon: Deduct up to $2,435 (single) or $4,865 (joint) on Form OR-40, Schedule OR-529, line 4.
• Pennsylvania: Deduct up to $15,000 per beneficiary per taxpayer on Schedule O, which flows to PA-40, line 10.
• Rhode Island: Deduct up to $500 (single) or $1,000 (joint) on RI Schedule M, line 4.
• South Carolina: Full deduction for all contributions made to the state’s 529 plan. Report on SC1040, line 47.
• Tennessee: No state income tax; no state tax deduction.
• Texas: No state income tax; no state tax deduction.
• Utah: Tax credit of 5% on contributions up to $2,040 per beneficiary. Report on TC-40A, Part 3, line 7.
• Vermont: 10% tax credit on contributions, up to $2,500 (single) or $5,000 (joint). Report on Schedule IN-112, line 6.
• Virginia: Deduct up to $4,000 per beneficiary per year, with unlimited carryover for excess contributions. Report on Schedule VAC, flowing to Form 760.
• Washington: No state income tax; no state tax deduction.
• West Virginia: Full deduction for all contributions. Report on WV Schedule M, line 6.
• Wisconsin: Deduct up to $3,560 (single) or $7,120 (joint). Report contributions on Schedule CS, which flows to Form 1, line 11.
• Wyoming: No state income tax; no state tax deduction.

Each state has its own set of rules, so it’s important to refer to your state’s tax department for the most accurate information. Many states have high contribution limits, making it easier to maximize your tax savings.