The state of 529 tax advantages

Are incentives available where you live?

As tax season approaches, it is important to inform your clients about state income tax deductions or credits for 529 contributions. Over 30 states offer a tax incentive for contributing to the 529 plan in an account owner’s state of residence.

What about the other 20 states? Do they offer state tax incentives? There are 11 states that do not have a state tax incentive. The other nine are parity states.

So, what does the word “parity” mean in the 529 industry?

Account owners who file in one of the nine parity states can claim a state tax deduction on 529 plan contributions they make to any 529 plan within or out of their state.

Parity states include:

  • Arizona
  • Arkansas
  • Kansas
  • Maine
  • Minnesota
  • Missouri
  • Montana
  • Ohio
  • Pennsylvania

The state in which your client pays taxes or lives may offer a 529 plan that provides state tax or other benefits, such as financial aid, scholarship funds and protection from creditors, not otherwise available to you by investing in my529. You and your client should consider such benefits, if any, before investing in my529. Please check out our map of state tax benefits.

From the FAN — Spring 2024