The Ultimate Guide to 529 Plans

If you use a 529 Plan savings account, then you probably already know how useful it can be when saving for your child’s education. A 529 Plan does not only allow for ample contributions and growth; it also allows for tax-exempt withdrawals. However, you will have to make sure that these withdrawals are used for qualified education-related expenses if you want to take advantage of the federal tax benefits and avoid penalties. Moreover, you will need to know exactly how your state treats 529 withdrawals to determine if you will have to pay any taxes or penalties at the state level.

What Are 529 Plan Qualified Expenses?

Qualified 529 Plan expenses are the education-related costs you can pay for with tax-free distributions from your 529 Plan. The savings in a 529 Plan are tax-deferred, and qualified withdrawals are tax-free at the federal level. Alternatively, if you withdraw funds for a non-qualified expense, you could have to pay federal income tax on the amount withdrawn, plus a 10% tax penalty. Therefore, it’s important to know what kind of expenses qualify for tax-free withdrawals when you’re ready to distribute funds from your 529 Plan.

A 529 Plan is generally designed for secondary educated related expenses, such as a 2 or 4-year college and graduate school. However, you can still use up to $10,000 from your 529 Plan to pay for elementary, middle, or high school tuition in most states. In any case, when it comes to the costs of secondary education, you can count on 529 Plan qualified expenses to include all of the following:

  • Tuition
  • Room & board (not to exceed the actual amount paid or the estimated cost included in the school’s federal aid cost of attendance calculations)
  • Required textbooks and school supplies
  • Special needs equipment
  • Computers and related equipment primarily used for school
  • Up to $10,000 in student loans

How Do 529 Plan Qualified Expenses Vary by State?

The 529 Plan rules are determined at the federal level, but these plans are administered at the state level. Fortunately, participation in the federal program is high, with 49 states (Wyoming is the exception) offering at least one 529 Plan, and all participating states using the same 529 Plan qualified expenses outlined in the federal tax code. That said, each state has different rules for 529 Plans regarding state income tax deductions, state contributions, payer contribution limits, and penalties for distributions unrelated to qualified education expenses.

Two of the most important factors to consider are state contributions and plan limits. State contributions refer to the amount the state is willing to contribute to a student’s 529 Plan, while plan limits refer to the maximum funds you can have in a single 529 Plan account. Once an account reaches its limit, you will not be able to make further contributions. However, this does not mean that a 529 Plan will not continue to grow beyond its limit. In theory, a 529 Plan can grow exponentially; you just will not be able to make more contributions.

529 Plan Rules & Resources In All 50 States

Alabama 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $5,000 per individual ($10,000 filing jointly)

State Contribution: None

Alabama 529 Plan Limit: $475,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax plus 10% penalty fee

Additional Resources: CollegeCounts

Alaska 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $100,000 (subject to federal gift tax)

State Contribution: None

Alaska 529 Plan Limit: $475,000 per beneficiary

State Fee for Non-Qualified Withdrawals: None

Additional Resources: Alaska529

Arizona 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $2,000 per individual ($4,000 filing jointly)

State Contribution: None

Arizona 529 Plan Limit: $494,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: AZ529

Arkansas 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $5,000 per individual ($10,000 filing jointly)

State Contribution: None

Arkansas 529 Plan Limit: $366,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: GIFT529

California 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: No state deductions

State Contribution: Up to $200

California 529 Plan Limit: $529,000 per beneficiary

State Fee for Non-Qualified Withdrawals: 2.5% additional tax

Additional Resources: ScholarShare529

Colorado 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: Up to account maximum

State Contribution: Up to $2,000 per year for four years

Colorado 529 Plan Limit: $400,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: CollegeInvest

Connecticut 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $5,000 per individual ($10,000 filing jointly)

State Contribution: Up to $250

Connecticut 529 Plan Limit: $300,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax Additional Resources: CHET Program

Delaware 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: No state deductions

State Contribution: None

Delaware 529 Plan Limit: $350,000 per beneficiary

State Fee for Non-Qualified Withdrawals: None

Additional Resources: DE529

Florida 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: N/A (Florida does not have state income tax)

State Contribution: None

Florida 529 Plan Limit: $418,000 per beneficiary

State Fee for Non-Qualified Withdrawals: None

Additional Resources: Florida Prepaid Savings Plans

Georgia 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $4,000 per individual ($8,000 filing jointly)

State Contribution: None

Georgia 529 Plan Limit: $235,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: Path2College

Hawaii 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: No state deductions

State Contribution: None

Hawaii 529 Plan Limit: $305,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: HI529

Idaho 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $6,000 per individual ($12,000 filing jointly)

State Contribution: None

Idaho 529 Plan Limit: $500,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax Additional Resources: Idaho College Savings Program

Illinois 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $10,000 per individual ($20,000 filing jointly)

State Contribution: $50 per child

Illinois 529 Plan Limit: $450,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: BrightStart529

Indiana 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: 20% of contributions up to $1,000

State Contribution: None

Indiana 529 Plan Limit: $450,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: CollegeChoice529

Iowa 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $3,439 per individual ($6,878 filing jointly)

State Contribution: None

Iowa 529 Plan Limit: $420,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax
Additional Resources: Iowa 529 Plan

Kansas 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $3,000 per individual ($6,000 filing jointly)

State Contribution: Up to $600 (low-income households only)

Kansas 529 Plan Limit: $418,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax
Additional Resources: LearningQuest

Kentucky 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: No state deductions

State Contribution: None

Kentucky 529 Plan Limit: $350,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: KY Saves 529 Plan

Louisiana 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $2,400 per individual ($4,800 filing jointly)

State Contribution: 2%-14% of account owner contributions (based on household income)

Louisiana 529 Plan Limit: $500,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax
Additional Resources: StartSavingLA

Maine 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: No state deductions

State Contribution: $500 per child, plus up to $300 in matching contributions

Maine 529 Plan Limit: $500,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: NextGen

Maryland 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $2,500 per individual ($5,000 filing jointly)

State Contribution: Up to $500 (based on household income)

Maryland 529 Plan Limit: $500,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: Maryland529

Massachusetts 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $1,000 per individual ($2,000 filing jointly)

State Contribution: $50 per child

Massachusetts 529 Plan Limit: $400,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: MEFA

Michigan 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $5,000 per individual ($10,000 filing jointly)

State Contribution: None

Michigan 529 Plan Limit: $500,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: Michigan Education Savings Program

Minnesota 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $1,500 per individual ($3,000 filing jointly)

State Contribution: Up to $500 (based on household income)

Minnesota 529 Plan Limit: $425,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: MN Saves

Mississippi 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $10,000 per individual ($20,000 filing jointly)

State Contribution: None

Mississippi 529 Plan Limit: $235,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: College Savings Mississippi

Missouri 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $8,000 per individual ($16,000 filing jointly)

State Contribution: None

Missouri 529 Plan Limit: $325,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax plus 10% of withdrawal earnings

Additional Resources: MOST 529 Plan

Montana 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $3,000 per individual ($6,000 filing jointly)

State Contribution: None

Montana 529 Plan Limit: $396,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: Achieve Montana

Nebraska 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $10,000

State Contribution: Varies based on private funding, with up to $1,000 for low-income households

Nebraska 529 Plan Limit: $400,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: NEST529

Nevada 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: N/A (no state income tax)

State Contribution: $50 per child, with up to $1,500 for low-income households

Nevada 529 Plan Limit: $500,000 per beneficiary

State Fee for Non-Qualified Withdrawals: None

Additional Resources: NVIGATE

New Hampshire 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: N/A (no state income tax)

State Contribution: None

New Hampshire 529 Plan Limit: $522,000 per beneficiary

State Fee for Non-Qualified Withdrawals: None

Additional Resources: 529 College Savings Program

New Jersey 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: Up to account maximum

State Contribution: Up to $1,500 per beneficiary

New Jersey 529 Plan Limit: $305,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: NJBest

New Mexico 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: Up to account maximum

State Contribution: None

New Mexico 529 Plan Limit: $500,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: The Education Plan

New York 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $5,000 per individual ($10,000 filing jointly)

State Contribution: None

New York 529 Plan Limit: $520,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: NY’s 529

North Carolina 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: No state deductions

State Contribution: None

North Carolina 529 Plan Limit: $420,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: College Foundation of North Carolina

North Dakota 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $5,000 per individual ($10,000 filing jointly)

State Contribution: Up to $200 match (or $300 for low-income households) in the first year that the account is opened

North Dakota 529 Plan Limit: $269,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: College SAVE

Ohio 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $4,000

State Contribution: None

Ohio 529 Plan Limit: $482,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: Ohio’s 529

Oklahoma 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $10,000 per individual ($20,000 filing jointly)

State Contribution: None

Oklahoma 529 Plan Limit: $300,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax plus up to 5% of the withdrawal amount

Additional Resources: OK4Saving

Oregon 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $150 per individual ($300 filing jointly)

State Contribution: $25 per child

Oregon 529 Plan Limit: $400,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: Oregon College Savings Plan

Pennsylvania 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $15,000 per individual ($30,000 filing jointly)

State Contribution: $100 per child

Pennsylvania 529 Plan Limit: $511,758 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: PA529

Rhode Island 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $500 per individual ($1,000 filing jointly)

State Contribution: $100 per child

Rhode Island 529 Plan Limit: $500,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: CollegeBoundBaby

South Carolina 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: Up to account maximum

State Contribution: None

South Carolina 529 Plan Limit: $500,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: FutureScholar

South Dakota 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: N/A (no state income tax)

State Contribution: None

South Dakota 529 Plan Limit: $350,000 per beneficiary

State Fee for Non-Qualified Withdrawals: None

Additional Resources: CollegeAccess529

Tennessee 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: N/A (no state income tax)

State Contribution: 4:1 matching program for low-income households

Tennessee 529 Plan Limit: $350,000 per beneficiary

State Fee for Non-Qualified Withdrawals: None

Additional Resources: TNStars

Texas 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: N/A (no state income tax)

State Contribution: None

Texas 529 Plan Limit: $500,000 per beneficiary

State Fee for Withdrawals Beyond 529 Qualified Expenses: None

Additional Resources: Texas College Savings Plan

Utah 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $2,040 per individual ($4,080 filing jointly)

State Contribution: None

Utah 529 Plan Limit: $500,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: My529

Vermont 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $4,000

State Contribution: None

Vermont 529 Plan Limit: $352,800 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: VT529

Virginia 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $2,500 per individual ($5,000 filing jointly)

State Contribution: None

Virginia 529 Plan Limit: $500,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: Virginia 529

Washington 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: Up to account maximum

State Contribution: None

Washington 529 Plan Limit: $500,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: WA529

West Virginia 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: Up to account maximum

State Contribution: $100 per child

West Virginia 529 Plan Limit: $400,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: Smart529

Wisconsin 529 Plan

Maximum Annual Contribution For State Income Tax Deductions: $1,670 per individual ($3,340 filing jointly)

State Contribution: $100 per child

Wisconsin 529 Plan Limit: $505,000 per beneficiary

State Fee for Non-Qualified Withdrawals: State income tax

Additional Resources: Edvest

Learn More About 529 Plans With Merit

Do you want to learn more about the benefits of 529 plans? If you’d like more personalized financial advice or assistance navigating the 529 qualified expenses in your state, be sure to contact Merit Financial Advisors today!