Texas 529 plan: no state income tax, what counts in 2026
With no income tax on wages, a Texas family has no deduction to win or lose. The choice of plan and the years of growth decide everything.
In the 529 at age 18
$110,759
$7,039 more than the same money in a taxable account, plus $0 of Texas tax saved along the way.
| You put in | $67,200 |
| Growth, tax-free for school costs | $43,559 |
| Taxable account after tax | $103,720 |
| Texas tax saved, 16 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 | 5 | $12,600 | $13,735 |
| 6 | 8 | $25,200 | $30,094 |
| 9 | 11 | $37,800 | $49,577 |
| 12 | 14 | $50,400 | $72,782 |
| 15 | 17 | $63,000 | $100,419 |
| 16 | 18 | $67,200 | $110,759 |
Worked out by Radif Partners · How we calculate · Texas rule read on October 19, 2026, brackets of tax year 2026 · not tax advice
Texas has no personal income tax, so a 529 contribution brings no state deduction or credit, and nothing is ever added back when money leaves the account. The federal advantages are the whole value: growth untaxed while invested and tax-free withdrawals for qualified costs, including up to $20,000 a year of K-12 costs per child from 2026. The state sponsors 3 programs: Texas College Savings Plan (direct-sold), LoneStar 529 Plan (advisor-sold), Texas Tuition Promise Fund (prepaid tuition). Accounts for one beneficiary across the Texas-sponsored plans stop accepting money at $500,000. Because there is no home-state break to lose, a Texas family may also use another state's savings plan with no tax cost, comparing fees and investments only. A Houston couple who save $350 a month from a child's second birthday would hold about $110,759 at 18 with a 6 % yearly return, an assumption, against $103,720 after tax in a brokerage account.
| State income tax on wages | None |
|---|---|
| Benefit for contributions | None (no income tax) |
| State plans (official names, no recommendation) | Texas College Savings Plan (direct-sold), LoneStar 529 Plan (advisor-sold), Texas Tuition Promise Fund (prepaid tuition) |
| Account balance limit | $500,000 |
Why the usual 529 question does not arise in Texas
Most 529 advice starts with the home state's deduction: how large it is, whether it requires the home plan, what it costs to leave. A Texas return has no line for any of it. There is no state tax on wages to reduce and therefore no deduction, no credit, no cap, no parity rule and no recapture. The state-by-state table shows Texas next to the states where the question matters.
That simplifies the choice. Any state's direct-sold savings plan is open to a Texas saver without a tax penalty, so the comparison comes down to fees, investment options and service, which each plan publishes in its disclosure document.
What the account is worth without a state break
The gain comes from the federal rules alone. Over sixteen years, $350 a month grows to $110,759 at a 6 % return, of which $43,559 is growth that will never be taxed if it pays for school. The same deposits in a taxable account, for a couple at $150,000 paying federal tax on dividends each year and on the gain at the end, leave $103,720. The gap of $7,039 is the value of the 529 wrapper for this family, with no state tax in either column.
Your Texas child’s account at 18
In the 529 at age 18
$110,759
| You put in | $67,200 |
| Growth, tax-free for school costs | $43,559 |
| Taxable account after tax | $103,720 |
| Texas tax saved, 16 years | $0 |
The three Texas programs
The Texas Comptroller oversees a direct-sold savings plan, an adviser-sold savings plan and a prepaid tuition fund. The first two are investment accounts whose value follows the markets. The prepaid fund follows its own contract, separate from the savings plans, and its terms are on the Comptroller's site. The $500,000 ceiling counts all Texas-sponsored accounts for the same beneficiary together, according to the plan's FAQ.
If the family moves
A family that leaves Texas keeps its account where it is. Whether new deposits earn a deduction in the new state depends on that state's rule. In Georgia, a couple at $150,000 putting $4,200 a year into Georgia's plan would save $210 a year; in Missouri, which accepts any state's plan, the same couple keeping a Texas account would save $197. Moving the old Texas balance to the new state's plan is allowed as a rollover, and Texas has no deduction to take back. The home plan or another state page covers that move.
Federal 2026 changes
Texas has nothing to conform to, so the federal rules apply as written: $20,000 of K-12 costs per child per year, postsecondary credential programs, $10,000 of student loans per borrower and the rollover of up to $35,000 to the beneficiary's Roth IRA. The plan's FAQ still mentioned the earlier $10,000 K-12 figure when we read it; the federal law is what governs.