By Dr. Jim Dahle, WCI Founder
529 plans are the most commonly used college savings vehicle among my regular readers. They benefit from higher annual contribution limits than Educational Savings Accounts (Coverdell ESAs), can be front-loaded for up to five years, and sometimes offer a break on state taxes. While not as flexible, they are superior to a UTMA or other taxable account due to protection from tax drag as the account grows and the tax-free withdrawals for educational purposes.
As a general rule, the contribution limit is $19,000 [2025 — visit our annual numbers page to get the most up-to-date figures]. However, there is nothing keeping your spouse, father, and mother from also opening 529 plans for your child. And they can all front-load five years' worth of contributions to their account if they like. Every state has at least one 529 plan, and these plans compete for investor dollars across the country. This generally results in significant improvements over time as fees come down and investment options improve.
Which State Has the Best 529 Plan Tax Breaks?
An investor can mostly use any 529 they please. However, many states offer either a state tax deduction or a state tax credit on contributions up to a certain amount. If your state 529 (and remember it's all about the owner's state, not the beneficiary's state) offers this, you should use it first, at least up to the amount of the tax deduction or credit. The following states offer a state tax deduction or credit for contributions to their 529 plan.
Note that the info in this chart [Current 2024] is almost constantly changing. I had to update a half dozen of these the very day of publication and the laws of the various states will continue to change going forward, so if you see an error, please email us at [email protected] and we'll fix it.
Let's spend just a minute on this chart. If you are located in one of these states, the best plan for you is your state plan, at least up to the maximum amount in the chart above. Except where specified “per beneficiary,” the amounts are per taxpayer. Virginia is an exception, where the deduction is per account. That's right, savvy Virginians open multiple accounts for additional state tax deductions. Except where specified as a tax credit, it is a deduction, sometimes “above the line” and sometimes “below the line.” Note that at the time I made this chart, some states had not yet published the inflation-adjusted amount of their deduction or credit for 2021. For example, my state of Utah offered a 4.85% credit on the first $2,135 contributed in 2022. That amount should go up slightly each year. I'll try to update those as I get the information.
Judged purely on the size of the deductions or credits, the most generous states appear to be Colorado, Illinois, Mississippi, Nebraska, New Mexico, Oklahoma, Pennsylvania, South Carolina, Virginia, and West Virginia.
Your state may not be in the list above. That is the case for one of three reasons:
- You have no state income tax (AK, FL, NV, SD, TN, TX, WA, WY)
- Your state offers no tax deduction or credit for 529 contributions (CA, DE, HI, KY, NH, and NC)
- Your state offers the same tax deduction for contributions to any 529 plan (AZ- $2,000/$4,000 per beneficiary, KS- $3,000/$6,000 per beneficiary, MN- Either a $500 credit that is phased out for most who read this blog or a $1,500/$3,000 deduction, MO- $8,000/$16,000, MT-$3,000/$6,000, PA- $15,000/$30,000 per beneficiary). Note that Arkansas offers a $3,000/$6,000 deduction for using an out-of-state plan (less than the $5,000/$10,000 if you use the in-state plan).
More information here:
When Is It Too Late to Contribute to a 529?
The Best 529 Plans
If you are in one of the seven tax-free states, in one of the nine states that don't offer a tax break, or in one of the two states that don't care which plan you use, this section will be the most important one in this post. If you are in one of the other states, you should use your state plan at least up to the amount of the tax break. Unless your state plan is terrible, you should probably stick with it even for amounts above the tax break, just for the sake of simplicity. The most important difference between 529 plans is clearly the presence and amount of a state tax credit or deduction. There are fewer and fewer “bad 529s” each year, and in many cases, the states with a bad 529 (usually filled with broker-sold, high expense ratio loaded mutual funds) offer a second one direct to investors.
However, for those in the other 18 states, let's list out the very best of the state 529 plans. For the most part, finding the best 529 plan for you should be based on fees and investment options. If a plan offers relatively low plan fees and a nice selection of low-cost index/passive funds from places like Vanguard and DFA, it is going to rank higher. The website usability, communication, and customer service is also going to vary, but those are much harder factors to weigh. I'll make an occasional comment on them and leave it to readers to further comment on them in the comments section below the post. I am also going to ignore the “pre-paid college” plans. These vary by state, but are primarily designed to be used by those attending state institutions in their state. They are a subject for another post.
The top half of the plans in the table above [click on the table to see a larger version] are all very good plans. The bottom half are good plans, but not quite top-notch. I'm going to go through the top 12 of the best 529 plans and discuss them individually.
#1 Michigan Education Savings Program
This was one of the bigger surprises of my review. This plan has made significant improvements (primarily lower costs) over the last few years and is now considered a top-rated plan by most. Costs are low, investments are good, the website is straightforward, and the investment oversight is top-notch. And Morningstar rewarded the plan with its gold star award in 2020 and 2021.
#2 Utah My529
This is the plan I use, and so do many people from out of state. They have been rated “gold” by Morningstar for a decade. Expenses ratios are low and seem to get lower every year. Investment oversight is great. I even got the chief compliance officer to take a call from me on his cell phone in the evening. They made an upgrade to their website recently that I considered to be mostly a downgrade (thus the phone call), but they have plans to restore the information I was missing there (price per share info). There are both Vanguard and DFA funds, but what I like best about the Utah plan (aside from the tax break for us Utahns) is the ability to really customize your asset allocation.
#3 Illinois BrightStart
Illinois has a perennially top-rated plan. My big beef with them is I think they actually offer so many options that it gets confusing. There are 11 different fund companies represented in their line-up. However, there are plenty of good ones and it is easy to keep expenses low. I'll be honest, though. When I think of state governments that I trust, Illinois does not spring to mind as being at the top of the list.
#4 New York's 529 Program (Direct)
Like many states, New York has both a direct and an advisor-sold plan. Make sure you're in the right one! The direct plan is frequently in the top five lists of savvy investors. I love that it is straightforward and low cost. You don't quite have the flexibility you get in the Utah plan, but you generally save a few basis points in expenses.
#5 California Scholarshare College Savings Plan
California has also been in and out of the top five over the years. Expenses have always been quite low. I ding them for not having Vanguard funds and for having so many active funds available.
#6 Minnesota College Savings Plan
Here's another big surprise from my research. This plan does not get the credit it deserves for out-of-state investors. Good funds, low expenses, straightforward website. As for state income tax, earnings are tax-deferred until they're withdrawn, and distributions for higher education expenses are free. I wouldn't be surprised to see people considering this one a top-tier plan soon.
#7 Nevada The Vanguard College Savings Plan
Nevada is another state with more than one 529 plan; make sure you pick the right one. This one, run by Vanguard, is often considered a top plan. The big advantage for out-of-state investors is that you can look at it while logged in to your regular Vanguard account, simplifying your financial chores.
#8 Ohio College Advantage 529 Savings Plan
I have seen this one in top five lists before as well. I don't think they've really changed anything, it's just that the competition has gotten more fierce. Costs are low, just be careful because they use a few actively managed funds in there.
#9 Missouri MOST Missouri's 529 Education Plan
This is another plan many people don't know about. This plan actually dropped a few Vanguard funds for DFA funds recently, but that's probably a good thing since the dropped ones were actively managed. Overall expenses tend to be a notch higher than most of the plans above.
#10 Pennsylvania College Savings Plan
This one is not a bad little plan, filled with Vanguard funds and reasonable expenses. Probably not going to be on anybody's top-5 list though.
#11 Virginia Invest529
Be careful in Virginia, they have a broker-sold 529, too, that is actually used by a lot of brokers. You don't want that one. You might not want this one either. It was a favorite of Morningstar's for a while, but they downgraded it recently as they changed their rating process. My biggest complaint is simply the sheer number of fund companies used. I like flexibility, but too much complexity is not helpful.
#12 West Virginia Smart 529
Again, beware the broker-sold option in this state. I'm not sure if this direct option is new or if Morningstar just missed it the last couple of years. It looks like a pretty decent plan and I wouldn't be surprised to see it move up the rankings in the next few years.
The Others
I don't see any reason for most to go much past #12 when trying to decide which 529 to use. But I'll make a few comments about the others on the chart anyway. If you're really careful, you can make really great use of the Massachusetts plan (or the New Hampshire plan, which could also go into the list above/next to Massachusetts). They're typical Fidelity—if you know where to look you can get the index funds with rock bottom costs, but they're going to do everything they can to try to get you into the high expense actively managed funds. Most of the others are occasionally ranked highly by others, but I dislike the lack of Vanguard funds. I've never been very impressed with the T. Rowe Price plans. Some people seem to like the changes that Oregon has been making, but I found their site to be one of the most confusing out there. They recently changed from a deduction to a tax credit that will hurt high-earner residents, too. South Carolina doesn't have the most straightforward website, but it could be a really good plan for a few of you. . . .i.e., those who live in South Carolina. Nobody else is welcome. There are only about three or four plans that don't want out-of-state investors, and South Carolina is one of them. I'll leave it on the list for South Carolinians to include in their search.
The Best 529 Plans: The Bottom Line
Look to your state plan first to see if you are eligible for a tax break there. Otherwise, pick a plan out of the top 12 above and go with it. Certainly, those who took my advice a few years ago and went with the Utah plan have had little reason to regret it. But there's no reason to be dogmatic about it. Enough other 529s have lowered expenses that there are now lots of good options out there. By carefully selecting investment options at any of the top 12 you can keep your expenses low enough that they won't be a significant drag on your returns.
What do you think? Which 529 plan do you use and why? Which would you use if you didn't get a state tax deduction or credit? Comment below!
I am interested in starting a 529 for my newborn daughter. I am a resident in NJ, going to NY fellowship next year.
NJ passed the College affordability act in which New Jersey taxpayers, with gross income of $200,000 or less, to qualify for a state income tax deduction for contributions into an NJBEST plan of up to $10,000 per taxpayer, per year, beginning with contributions made in tax year 2022.
My wife and I are below the 200K limit. I plan on using the SP500 plan with expense ratio of 0.14% for the NJBEST 529.
Would you recommend this over the Utah, Michigan or NY plan?
Sure. If you get something from your state’s 529, use it.
Hi Jim, Thanks for all what you do. Question for you or anyone here who might know:
I live in TX, not a good 529. Was thinking about opening Michigan 529 plan for my kids. I read the whole thing but couldn’t find if they allow to pay for k-12 private school tuitions & expenses? If not, what plans allow that? I have 4 kids from 9th grade to KG, planning on all for public colleges/universities & if they get scholarships, can use that money for private school k-12, which is a must for us.
Yes, all plans allow this. Michigan is a fine choice for you.
Not sure what you’ll do if # 4 gets a scholarship, since it’ll be too late to use that for K-12. You can probably change the beneficiary to a grandkid eventually though.
I changed my mind after reading your article about my529 Utah plan. I opened accounts for all of them there. I selected the following options in customized static, I want to know if I was aggressive enough, or do I need to change it to be more aggressive?

my529 Total Stock Market Index UTVTX 20%
my529 Institutional Index UTVLX 10%
my529 Growth Index UTVGX 25%
my529 Mid Cap Index UTVMX 15%
my529 Small Cap Index UTVSX 10%
my529 Global Equity UTDGX 20%
Thanks in advance
100% stock certainly qualifies as aggressive.
What’s with the growth tilt? Is that performance chasing? And why the TSM and the 500 index? Don’t need both. Global equity is also an interesting choice. You’ve basically got 4 funds in there that own US large cap stocks. If you just want a small tilt (and I’m not sure why you’d go small and not value since the data suggests the value factor matters more than the size factor) then why not just Institutional, mid-cap, small, and total international?
You are right! it is totally performance chasing! As I am late I thought to chase the performance. But I will take your advice.
Thank you
Thank you
Thank you for the great analysis, WCI!
Is anyone aware of any 529 account with a brokerage option? In essence, to choose any investment you want like a brokerage account not only the certain funds available.
No, sorry.
Hi all,
Wondering if anyone has any insight into when money needs to be withdrawn from a 529 for payment for private primary school .
Our tuition is due in June 2022. Do i have to withdraw from the 529 before I pay the tuition bill? Can i leave it there until the end of 2022? Can i leave it in there indefinitely and withdraw in a few years to reimburse myself for the tuition payment (like an HSA)? Not finding this information. Thank you!
Needs to be taken out in the same year as the expense (unlike an HSA).
You say
“If you are in one of the seven tax-free states, in one of the nine states that don’t offer a tax break, or in one of the two states that don’t care which plan you use, this section will be the most important one in this post.”
After you don’t elaborate this point after. Are you saying this means because I am living in Texas I won’t qualify for a deduction if I open a 529 account in say, Utah bc we have no state income tax?
That’s right.
Does your child’s qualification for scholarship into University or college gets affected by your 529 Funds,?
can universities deny/alter scholarship in case they see you have ample funds in your 529 account?
Need based scholarships, yes. Whether it affects other scholarships when it is not supposed to, I have no idea. I had to fill out a FAFSA this year for my daughter so I guess they have that info when they decide on the merit based scholarships. It would be interesting to get the inside scoop from someone in the scholarship office on why they even require it and how they might use it.
In your opinion why is the NJ plan so uncompetitive and egregious fees?
Thanks.
https://www.njbest.com/
Terrible website to start with. Gotta really dig to get any info on fees and investment options. The only fees posted seem to start at 0.40% and the funds are Franklin Templeton, not exactly my first choice (or even in the top ten) when it comes to mutual fund companies.
In states where the deduction cap for a contribution is per beneficiary (e.g., Virginia, Georgia), can’t one just circumvent the cap by contributing to other beneficiaries, and then changing the beneficiary a week later? E.g., in Virginia contribute $4k directly to the child in account A, contribute $4k to each parent in accounts B and C, and then change the beneficiary on accounts B and C to the child so that $12k of contributions gets a tax deduction? I suppose there’s gift tax concerns if you took this to an extreme, but are there any other considerations here?
I doubt it. Most who pass laws like these don’t think about stuff like this as deeply as you and I do.
In your section on “The Best 529 Plans,” you write:
“If you are in one of the seven tax-free states . . . this section will be the most important one in this post.”
I don’t understand this. If my state has no state income tax (I live in FL) but has decent investment options with low fees, what is the benefit to using another state’s 529 plan? Do any other states offer a *refundable* tax credit for 529 contributions, such that I could file a tax return even with no income in that state and get the credit back as a refund?
No, there are no refundable credits with 529 contributions for non residents that I am aware of.
The point is that you can use any plan you like. If you’re happy with your state’s plan, knock yourself out. But I wouldn’t rank Florida’s plan very high and it doesn’t seem like anyone else does either.
Ah okay, makes sense, and thanks for the quick reply!
We live in Pennsylvania and are considering using the Utah plan for its low fees and available funds (doing a split between the total stock mkt, small value cap and total intl Mkt). We currently have a taxable account at Vanguard consisting of VTSAX and VTIAX and occasionally do tax loss harvesting. Is there any chance that we might run into the wash sale rule for holding the funds into the Utah 529 plan? My understanding is that Utah 529 uses Vanguard funds, but the funds have different ticker symbols which should allow me to continue to TLH safely. Am I missing anything?
No. Wash sale rules don’t apply to 529s. Only taxable accounts and IRAs.
I live in Louisiana and am considering opening a 529 plan here. I’m wondering if you could comment on how to evaluate the performance of different states’ plans? From what I understand, they do vary in performance, but I’m having difficulty finding good comparisons. Given that significant amounts of money will accumulate in these accounts, I would think that differences in performance should factor heavily into people’s decision about which state’s plan to choose, since it could well make at least as much difference, if not more, than the various state tax incentives offered. Saving for College rates Louisiana among the lowest performers, only 2.5/5 stars. But if I choose from among the plan’s Vanguard funds, those are presumably going to perform the same as other states’ equivalent Vanguard options, correct? Thanks in advance for your advice on how much weight to put on performance and where I can find reliable information/ratings about this.
That’s right. Funds are often similar across plans, so that state tax break is comparatively relatively important.
So I should ignore the overall performance scores of the states’ plans and focus on the performance of the specific funds I choose?
Those scores aren’t just “performance” scores. But yea, you can start with a scoring system, but as discussed in the post, the best move if your state offers a tax break is to use your state up to the amount of the tax break, then above and beyond that can pick one of the “top states”.
Meanwhile, use the best available investments in whatever plan(s) you choose.
Hi! Does Vanguard still have plan fees? The table above has it at 0.12 to 0.19% plan fees. I’m on the site looking at 529s, and I’m not for the life of me finding the plan fees listed anywhere. I see the expense ratios for the underlying investments but not a separate plan fee. I even see this page where it says N/A on account fees for 529s. What am I missing? Thanks!
https://investor.vanguard.com/client-benefits/account-fees
Lots of 529 plans use Vanguard funds. Are you talking about the Nevada plan? I see ERs there of 0.12% to 0.42% but that’s the only fee I see listed.
https://personal.vanguard.com/pdf/s337.pdf?2210072184
My wife and I are at a point where we have maxed out 403b and contribute to back door Roth IRA. We both work a large university in north east and have option for 457b (all the options are the same as they are in 403b) or we could start investing in 529 with contribution of $10 K state tax deduction. Which one would be better to tackle first? 457b or 529?
Thanks!
Depends on your goals. In general, I recommend 20% for retirement. If you’re not there yet with your 403bs and BD Roths, then you should do the 457s. Hopefully you can still put something into the 529s after you save 20% of gross for retirement, in which case you’d use the 529s for that.
Thank you for this article! It is very helpful.
I just had a quick question. We were living in California when we had our child and invested in the Utah 529 (as California has no tax breaks) and have been happy with it. However, we have recently moved to Oregon and note that Oregon has a tax credit ($340 if we contribute $6,800 due to our tax bracket) but higher plan fees (0.25% vs Utah’s 0.1-0.15) and it seems like so-so investments. Is the tax credit really worth it based on your sense of these two options or should we just continue to invest into Utah’s plan? I know that this may be a matter of personal preferences. Our child is 2 yo and we plan to do a significant contribution this year (about 10,000).
Thank you!
Doesn’t matter much since those two things offset each other. The wrong answer, of course, would be California but I think OR or UT could both be right answers. The more you have in the plan the more valuable the lower ER is compared to the annual tax break. IF OR doesn’t recapture taxes for out of state 529 rollovers you could also contribute to OR then eventually roll it over to UT. My quick Googling says it isn’t recaptured by OR so that’s probably an option if you really want to optimize things.
Any updates especially those helping us California folks? Still no tax breaks for us?
I don’t know of any changes to California 529 laws.
Can, say the grandparents, open a 529 in their state for their granddaughter/grandson and get a tax deduction for themselves? If you are using the standard deduction can you use this as a deduction still? If you are not using the standard deduction does this completely remove that amount from your taxes owed? Say you place 1000 in and you get a 1000 dollar tax deduction, does that make your taxes owed directly 1000 less?
Yes.
Yes.
Only for the state.
No, that’s not the way a deduction works (that would be a credit). Basically, a $1,000 tax deduction means that you don’t pay taxes on that $1,000. So it might only reduce your taxes by $200-400.
I’m not seeing an option to purchase Vanguard funds in the Utah 529. If I choose “customized static” there are just funds that start with “UT”. Is this new? I’m thinking UTVTX with the underlying fund expense of 0.10% looks good.
The tickers are relatively new, but yea, those are Vanguard and DFA funds.
Hey Jim,
As a Mainer I couldn’t help but notice that only one state was left off the article. After doing some research it looks like Maine offers a state tax credit of $1000 to families with a combined income of under $200,000, something most physician families likely wouldn’t qualify for. Looks like I’ll be using one of the other states you recommended. Thanks for all you do.
I didn’t believe it when you said it and went back and combed through the article, but I think you’re right. I think I forgot Maine. I’m so embarrassed. We’ll get it added. I bet the problem is that I somehow thought MN was Minnesota and Maine or something, I dunno. Thanks for the correction. But your assessment sounds right that it isn’t much of a tax break for most WCIers so I’d just use a better plan.
Question: As a NJ resident are you only allowed to open a 529 for NJ pr can you open for any state? If I can open for another state, do i have to be a resident of that state? How does it work when it’s time to use it for school expenses and how much can you roll over? Is there an income limit?
Any state.
No.
No income limit and you can roll it all from one state to another.
Question: As a NJ resident, I’m only allowed to open a NJ 529 or can I open a 529 for any state? Do I have to be a resident of that state in order to open one? How does it work when I decide to use for school expenses? How much can it be rollover to an IRA?
As mentioned above, you can open them anywhere without regard to residency. When I pull the money out, I simply transfer it to my bank account and Venmo it to the kid and they send me a receipt, although you can have the money sent to the kid or the school directly. You can’t roll any of it to a traditional IRA, but after 15 years you can roll up to $35K of it into the beneficiary’s Roth IRA. Note there are some rules associated with that you can read about here:
https://www.whitecoatinvestor.com/the-529-to-roth-ira-rollover/
California has the lowest ER bar none (except for states like Florida that limit to residents only) for a S&P500/Total Market Index fund investment strategy.
If my child was born late December before the new year, and it takes a few weeks to get his SS number(after the new year), is there a way to make the contribution for 2024 tax purposes? Residence state is KS and I’m using MESP. As a backup, I also thought about contributing the amount I’d like to contribute to our newborns 529, to our 2 year olds, since we should still get the increased deduction(per beneficiary) in ks.
Thanks
No. But seriously, you’re way too worried about this. If you’re really worried you won’t be able to save up $800K for your kid’s college without getting this in for this year, keep in mind that there is nothing keeping you from opening multiple 529s in multiple states and putting $400K in there in a few weeks when you get the Social Security number.
This is like the people that are opening 529s in their names and then changing the beneficiary to their kid in a few years when they have one. It’s just unnecessary. Give me a break. I mean, run the numbers on 18 $18K contributions. It’s plenty of money for school.
=FV(8%,18,–18000) = $674K.
Do you really need that extra year? No.
Our kids’ 529s are all over funded at 1/5th that amount given their school plans.