Kentucky 529 plan: no state deduction in 2026
Kentucky offers no break on deposits, then lines up almost every withdrawal with federal law, which makes the account simple to use and easy to undervalue.
In the 529 at age 18
$66,668
$1,113 more than the same money in a taxable account, plus $0 of Kentucky tax saved along the way.
| You put in | $37,800 |
| Growth, tax-free for school costs | $28,868 |
| Taxable account after tax | $65,555 |
| Kentucky tax saved, 18 years | $0 |
Taxable account: dividends taxed every year and the remaining gain taxed at sale, at the 2026 federal capital gains rate for this income, NIIT where it applies, and your state marginal rate.
| Year | Child’s age | Put in | 529 balance |
|---|---|---|---|
| 3 | 3 | $6,300 | $6,867 |
| 6 | 6 | $12,600 | $15,047 |
| 9 | 9 | $18,900 | $24,788 |
| 12 | 12 | $25,200 | $36,391 |
| 15 | 15 | $31,500 | $50,210 |
| 18 | 18 | $37,800 | $66,668 |
Worked out by Radif Partners · How we calculate · Kentucky rule read on October 19, 2026, brackets of tax year 2026 · not tax advice
Kentucky gives no state income tax deduction and no credit for contributions to KY Saves 529, so a deposit in 2026 does not lower the Kentucky return. The state taxes income at a flat 3.5 % in 2026, and the plan's value comes from what it keeps away from that rate: growth inside the account is not taxed each year, and qualified withdrawals are exempt from Kentucky tax. Kentucky is one of the states that follows the 2025 federal law on the way out. Its plan supplement of September 2025 says the expanded K-12 expenses, up to $20,000 a year from 2026, and postsecondary credential costs are free of Kentucky tax and recapture, and student loan repayments are qualified too. The open question is the rollover from a 529 to a Roth IRA, which the program description says Kentucky law does not yet address. One beneficiary's accounts can receive deposits until they reach $450,000.
| Benefit for contributions | None |
|---|---|
| State plans (official names, no recommendation) | KY Saves 529 |
| Account balance limit | $450,000 |
| K-12 withdrawals qualified for state tax | Yes |
| 529 to Roth IRA rollover qualified | Not stated by the state |
| Student loan payments qualified | Yes |
| Add-back on a rollover to another state’s plan | No |
No line on the return for deposits
The KY Saves 529 tax benefits page and its program description list tax-deferred growth and tax-free qualified withdrawals, and no deduction. No official Kentucky statement saying "no deduction" in so many words was found; the conclusion rests on that silence. Because there is nothing to subtract, questions that weigh heavily elsewhere disappear here: there is no cap to fill before December, no reason to prefer the home plan for tax purposes, and no add-back to fear when money moves to another state's plan.
What the account is worth without a deduction
Kentucky taxable income starts from federal adjusted gross income, so the earnings of a taxable brokerage account are taxed by both. Take a couple at $88,000 who save $175 a month from a child's birth to age 18 at an assumed 6 % a year. The 529 grows to about $66,668. The same deposits in a taxable account, with dividends taxed each year and the gain taxed at sale, end near $65,555. Kentucky's share of the gap is modest at 3.5 %: about $1,010 on the growth, the rest is federal. The growth calculator at the top runs the same comparison with your own figures.
Most Kentucky cities and counties also levy occupational license taxes on wages. Those are local and are not part of any figure on this page.
K-12 and the 2025 federal law: Kentucky follows
The September 2025 supplement explains that Kentucky tax law is designed to align with all qualified uses under the federal 529 section. It concludes that withdrawals for the wider list of K-12 costs, such as curriculum, books, tutoring and testing, up to $20,000 a year from 2026, and for postsecondary credentials are not subject to Kentucky income tax or recapture. No Department of Revenue guidance confirming it was found, so this rests on the state plan's own document.
K-12 costs paid from KY Saves 529
Tax-free from the 529 this year (federal)
$14,000
| Federal cap per child, 2026 | $20,000 |
| Above the cap | $0 |
| Federal tax and 10 % on that part | $0 |
| Kentucky treatment | Treated as qualified |
Loans yes, Roth rollover unsettled
Student loan repayments are qualified for Kentucky, within the federal $10,000 lifetime limit per borrower. The 529 to Roth IRA rollover is different: the program description says Kentucky law does not currently address its state tax consequences, so this page does not say how Kentucky treats it. The federal side is on the Roth rollover page.
The earnings part of a withdrawal that ends up in federal adjusted gross income, such as a non-qualified one, is taxed by Kentucky at 3.5 %. A family that later moves to a state with a deduction would start earning that state's benefit on new deposits; nothing from the Kentucky years carries over, since nothing was deducted.