529 tax deduction by state in 2026: what each rule is worth to your household

The federal return gives nothing, the state return may

The IRS says it plainly in its 529 questions and answers: contributions to a 529 plan are not deductible. The federal benefit comes later, as tax-free growth and tax-free withdrawals for qualified costs. Any money you get back in April for the deposit itself is a state matter, written in state law and administered by the state revenue department, and it shows up on the state return only.

That has a practical consequence. Two families with the same income, the same child and the same deposit can get very different results depending on where they file. A household that moves across a state line in June can lose its break, gain one, or find that half the year counts under one rule and half under another. The table under the calculator gives each state's rule as we read it on the revenue department or plan site; the rest of this page explains how to read it.

Five families of rules

No wage income tax. Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming. There is nothing to deduct from, so the plan you pick has no state tax angle on the way in.

An income tax, but no break for contributions. California, Hawaii, Kentucky, North Carolina. Residents still get the federal advantages of a 529, and the state usually exempts qualified withdrawals, yet the deposit itself earns nothing.

A deduction or subtraction. This is the common form: 33 states. You subtract contributions, up to a cap, from the income the state taxes.

A credit. Indiana, Minnesota, Oregon, Utah, Vermont. The state takes a percentage of your contribution straight off the tax you owe, which makes the break the same size at most incomes. Minnesota lets residents pick either form each year.

Special shapes. A deduction with no dollar cap at all, an income ceiling, a carryforward of the excess, a smaller deduction for another state's plan. These details move the answer more than the headline cap does.

Why the deduction is worth your marginal rate

A subtraction lowers taxable income, so it saves the tax on the last dollars you earned, at the top rate you reach. In a flat-rate state the arithmetic is one multiplication. At $95,000 on a joint return, a $4,000 deposit saves $200 in Georgia (4.99 %), $160 in Mississippi (4.00 %), $176 in Colorado (4.40 %). The deposit is the same; the state rate does all the work.

In a state with graduated brackets the value climbs with income. Maryland taxes the first dollars at low rates and the top of the scale at much higher ones. A Maryland couple at $90,000 who put $5,000 toward one child save $238 at a 4.75 % rate; the same couple at $320,000 save $288 at 5.75 %. Where a county or city income tax follows the state base, its rate goes in the calculator's local field. When a large deduction pulls income across a bracket line, the engine computes the tax before and after rather than applying a single rate, so the figure stays exact.

Credits: a percentage of the deposit

A credit reverses the logic. Indiana gives 20 % of contributions to its own plan, up to $1,500 per return, so a single saver at $70,000 who deposits $3,000 gets $600 off the Indiana tax, an effective 20 % return on the deposit before any growth. The credit stops growing at $7,500 of contributions. Because the credit is nonrefundable, it cannot exceed the tax the household owes.

Utah ties its credit to its own flat rate, 4.45 %, and counts contributions up to $5,120 per child on a joint return. A Utah couple who reach that figure for each of three children claim $684. The per-child design means a large family gets a larger credit, which is not true in Indiana.

Caps: per return, per taxpayer or per child

The cap is where the table gets slippery. States with a cap per return or per taxpayer: Alabama, Arkansas, Connecticut, Delaware, District of Columbia, Idaho, Illinois, Indiana, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Jersey, New York, North Dakota, Oklahoma, Oregon, Rhode Island, West Virginia. In these, a second or third child changes nothing; Illinois, for instance, stops at $20,000 on a joint return however many accounts the family holds. States whose cap follows the beneficiary, alone or per contributor: Arizona, Colorado, Georgia, Iowa, Kansas, Louisiana, Maine, Maryland, New Mexico, Ohio, Pennsylvania, South Carolina, Utah, Vermont, Virginia, Wisconsin. Georgia allows $8,000 per beneficiary on a joint return, so a couple with two children can deduct up to $16,000 in a year.

"Per taxpayer" is also a trap for married couples. In Alabama and Maryland the joint figure assumes both spouses contribute; when only one spouse writes the checks, the state notes say the household reaches half. Iowa grants its deduction to account owners only, so a grandparent who sends money to a parent's account gets nothing there. South Carolina is the outlier the other way: contributions are deductible with no dollar cap other than the plan's balance limit, so a couple at $210,000 who put in $30,000 save $1,563.

Excess contributions are not wasted as savings, only as deductions. A few states let the part above the cap roll into later years: Arkansas, Connecticut, District of Columbia, Louisiana, Maryland, Ohio, Oklahoma, Rhode Island, Virginia, West Virginia, Wisconsin. Everywhere else, spreading deposits across two tax years is the only way to deduct more.

Income limits and the plan you choose

States with an income test: Delaware, Maine, Minnesota, New Jersey. Delaware is the sharpest: its subtraction disappears entirely once federal adjusted gross income (AGI, the figure at the bottom of page one of Form 1040) passes $100,000 single or $200,000 joint. Just under the line, a couple who put in $2,000 save $132; just over it, nothing. Minnesota phases out its credit by income but keeps the subtraction for everyone.

Most states reward only their own plan. A short list accepts any state's 529: Arizona, Kansas, Maine, Minnesota, Missouri, Montana, Ohio, Pennsylvania. The parity page lists them with the partial cases, and the out-of-state plan page weighs the deduction against fees.

Reading the timing and the fine print

By default a contribution counts on the return for the year it is made. Several states, Georgia, Iowa and Indiana among them, let a deposit made in the first months of the next year count for the prior return, which gives a late saver a second chance. Each state page names the deadline its revenue department or plan sets.

The break can also come back. A deduction taken on money that later leaves for a purpose the state does not accept, or moves to another state's plan, is often added back to income. The recapture page goes through those triggers. For how much a single household can put in at all, see 529 contribution limits.