A 529 plan is commonly used to help families save for college, but you can use these tax-advantaged plans to save for a range of educational costs throughout your childâs life.
Thanks to changes in the federal tax laws in 2025, itâs now possible to use 529 plan funds to pay for homeschooling costs, and expenses such as books and tutoring for students in K – 12 private schools as well.
Different 529 plans have different tax rules, offer different investment options, and â most important â 529 plans have different contribution limits by state, some of which have changed for 2026. Itâs important to look into various plans and decide which one is the best for you and your family.
Table of Contents
Key Points
⢠529 plans are tax-advantaged savings accounts available in every state except Wyoming.
⢠529 plans are primarily for qualified higher education expenses, but now also include K-12 private school and some homeschooling costs.
⢠Each state sets its own aggregate total maximum contribution limit per beneficiary.
⢠These plans offer tax-free growth, and some 40 states provide a state tax deduction or credit for contributions.
⢠While contributions that exceed the $19,000 annual gift tax exclusion for 2026 must be reported, there is typically no penalty for contributing more than the state’s specific plan maximum.
What Is a 529 Plan?
529 plans are tax-advantaged savings plans that are designed chiefly to be used for qualified higher education expenses like tuition, housing, and books at postsecondary institutions such as a college, a trade school, and graduate school.
Thanks to tax law changes in 2025, parents can now withdraw up to $20,000 of 529 funds annually to use for a childâs elementary or secondary school education at a private or religious school. Itâs also possible to use 529 funds to cover certain homeschooling expenses.
How a 529 Plan Works
Each 529 plan has a named beneficiary (the student). The account holder â usually a parent or grandparent â contributes savings to the plan up to the allowable 529 limits, which vary by state (see below).
Every state except Wyoming offers its own 529 plan. Although you cannot deduct 529 plan contributions on your federal taxes, some 40 states and the District of Columbia offer a state tax deduction or credit for contributions. California, Hawaii, Kentucky, and North Carolina do not offer a state tax deduction for 529 contributions.
In most cases, but not all, you have to be a resident of that state in order to claim the state tax deduction.
Understanding Contribution Limits
If you contribute over the annual limit for a given plan, you may not get the additional tax deduction, but there typically isnât a penalty for overcontributing. Some states allow you to carry-forward excess contribution amounts; be sure to check the terms of the plan youâre considering.
The one factor some higher-income families have to consider is whether they are contributing in excess of the $19,000 annual gift tax exclusion. If thatâs the case, form 709 has to be filed with the IRS, and the total amount will count toward the individualâs lifetime gift exemption, which is $15 million starting in 2026 (meaning, an individual would have to give over $15 million during their lifetime to owe federal gift tax; $30 million for couples filing jointly).
How Are 529 Plans Invested?
Once contributions are made, the account holder typically has a range of investment options to choose from, including mutual funds or exchange-traded funds (ETFs).
Many 529 plans offer an age-based mutual fund thatâs similar to a target-date fund for retirement. These plans adjust their holdings over time to become more conservative. 529 plan investments grow tax free. And qualified withdrawals, including investment earnings, are not subject to federal or state taxes.
There are some 529 plan withdrawal penalties, however. For instance, any amount of money from the plan used for something other than qualified expenses for the studentâs education incurs an income tax liability and a 10% penalty upon withdrawal.
Why Are There Maximum Contribution Limits?
In addition to yearly contribution limits for some 529 plans, there are aggregate maximum contribution limits that apply to the total contributions to the plan, for each beneficiary. States sponsor and operate their own 529 education savings plans and set their own aggregate max contribution amounts.
Many states have a total allowable contribution limit of $500,000 per beneficiary, though some states have lower or higher 529 limits. These limits are generally based on the cost to attend a four-year undergraduate or graduate program within the state.
Students who donât have enough funds in a 529 plan to cover the cost of college can turn to other forms of financial aid, including scholarships, grants, and federal and private student loans.
529 Plan Max Contribution Limits by State
The max contributions to 529 plans vary based on the state plan youâre enrolled in. Below is a list of 529 contribution limits for 2026 in every state, according to Saving For College, a research company focused on educational policies.
| State | Contribution Limit |
|---|---|
| Alabama | $475,000 |
| Alaska | $550,000 |
| Arizona | $590,000 |
| Arkansas | $500,000 |
| California | $529,000 |
| Colorado | $500,000* |
| Connecticut | $550,000 |
| Delaware | $500,000 |
| Florida | $500,000 |
| Georgia | $235,000 |
| Hawaii | $305,000 |
| Idaho | $500,000 |
| Illinois | $500,000 |
| Indiana | $450,000 |
| Iowa | $505,000 |
| Kansas | $501,000 |
| Kentucky | $450,000 |
| Louisiana | $500,000 |
| Maine | $545,000 |
| Maryland | $500,000 |
| Massachusetts | $500,000 |
| Michigan | $500,000 |
| Minnesota | $525,000 |
| Mississippi | $400,000 |
| Missouri | $550,000 |
| Montana | $396,000 |
| Nebraska | $550,000 |
| Nevada | $500,000 |
| New Hampshire | $621,411 |
| New Jersey | $305,000 |
| New Mexico | $500,000 |
| New York | $520,000 |
| North Carolina | $550,000 |
| North Dakota | $269,000 |
| Ohio | $541,000 |
| Oklahoma | $450,000 |
| Oregon | $400,000 |
| Pennsylvania | $511,758 |
| Rhode Island | $520,000 |
| South Carolina | $575,000 |
| South Dakota | $350,000 |
| Tennessee | $500,000 |
| Texas | $500,000 |
| Utah | $574,000 |
| Vermont | $550,000 |
| Virginia | $550,000 |
| Washington | $500,000 |
| Washington D.C. | $500,000 |
| West Virginia | $550,000 |
| Wisconsin | $589,650 |
| Wyoming | N/A (the state does not offer a 529 plan) |
*Coloradoâs Smart Choice College Savings Plan has a limit of $400,000.
States with Highest Aggregate Limits
The states with the highest allowed aggregate 529 contribution limits remain the same from 2025 to 2026:
• Arizona
• New Hampshire
• South Carolina
• Utah
• Wisconsin
These states have a maximum contribution limit greater than $550,000, with New Hampshire allowing the highest 529 limit in the U.S. at $621,411.
States with Lowest Aggregate Limits
State 529 programs that have the lowest total contribution limits (i.e., under $400,000) include:
• Delaware
• Georgia
• Hawaii
• Montana
• New Jersey
• North Dakota
• South Dakota
Georgiaâs 529 savings plan has the lowest aggregate contribution limit nationwide at $235,000, while Wyoming doesnât offer a state-sponsored 529 plan at all.
Tax Benefits for 529 Plans
The advantages to 529 plans go beyond saving for your childâs college education. A 529 might unlock certain tax benefits. For example, earnings in the account grow tax-free and there is no federal or state income tax liability for qualified withdrawals.
More appealing for some families is the opportunity to take a state tax deduction each year you contribute. Some 40 states now allow you to deduct your 529 contributions up to a certain limit from your taxable income. For example, in New York, residents can deduct up to $5,000 in 529 contributions, or $10,000 for those who are married, filing jointly.
But not all states allow you to deduct 529 contributions. For example, California, Kentucky, and Hawaii donât offer a state tax deduction or credit for 529 contributions on their state income tax returns. However, qualified 529 withdrawals are exempt from income tax in all three of those states.
Eight states (Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington) have no state income tax so there is no 529 deduction in those states. As a reminder, although there is no state income tax in Wyoming, this state doesnât offer a 529 plan currently.
Tax deduction limits and rules vary by state, so check with yours.
529-to-Roth IRA Rollover
Traditionally, a downside to saving money in a 529 plan has been the 10% penalty and potential tax liability incurred on earnings for non-qualifying withdrawals. This might come up if you over-saved in the account, or if your child chooses not to go to college, and you wish to withdraw the funds youâve saved.
The SECURE 2.0 Act of 2022 has addressed these concerns. Starting in 2024, unused 529 funds can be rolled over into a Roth IRA under the original beneficiaryâs name without penalty or tax implications. Excess contributions can also be transferred to another beneficiary, or used later to pay off student loans.
There are some guidelines for a 529 to Roth IRA rollover. The 529 plan must have been active for at least 15 years, and the rollover funds must have been in the account for at least five years.
Finally, the maximum annual rollover contribution permitted for 2026 is $7,500, based on Roth IRA 2026 contribution limits (IRA contribution limits typically change annually).
Despite these rules, the ability to do a Roth IRA rollover gives 529 account holders a penalty-free option, if needed.
How to Maximize Your 529 Contributions
If youâre considering a 529 for your child, you are not limited to choosing a 529 plan from the state you reside in. Many states allow out-of-state residents to open a 529 account. Here are some tips on how to maximize your savings in a 529.
• Explore plans from multiple states and compare their tax benefits, investment choices, and fees to those of your stateâs plan.
• Check to see if your company offers 529 plan employee benefits. Some employers now provide these benefit plans, which allow you to contribute directly from your paycheck.
• Many states offer direct-sold plans in which you select the investments in the plan yourself, and broker-sold plans in which a broker selects investments for you. Broker-sold plans typically come with more fees. Consider enrolling in a direct-sold 529 plan to help save on fees.
• Anyone, including grandparents and family friends, can contribute to a 529 plan, so make sure loved ones are aware that you have a 529 for your child to save for college. They may want to make a contribution to the plan as a birthday gift, for instance.
• You can open a 529 as soon as the beneficiary has a Social Security number. Start saving early and set up automatic contributions to the plan. The longer the money is invested, the more time it has to grow.
The Takeaway
A 529 can be a good way to save for your childâs education. The earlier you open a 529, the more time you have to contribute and save, and the more time the money in the plan has to grow. Just be sure to find out the 529 maximum contribution limits for the state in which you have the plan, and consider the tax implications.
FAQ
What happens if you contribute too much to a 529 plan?
Contributing more than your stateâs 529 plan allows doesnât typically incur a penalty. But savers should be aware that a single contribution thatâs above the gift tax exclusion of $19,000 for 2026 would reduce your lifetime gift tax exclusion. But given that the lifetime exemption for the gift tax is $15 million, this likely wonât be a concern for many families.
What is the 5-year rule for 529 plans?
To contribute more in one year to a single 529 recipient without impacting your lifetime gift tax exemption, you can front-load up to five years of contributions into the 529. Doing so avoids impacting your lifetime gift tax exemption, but it also means that you canât make additional contributions to the same beneficiary for the next five years.
What happens to a 529 plan if your child doesnât go to college?
If your child doesnât go to college, you have a few options for a 529. You can consider rolling the funds into a Roth IRA for the beneficiary, for instance (be sure to pay attention to the contribution limits on these rollovers). Or you could change the primary beneficiary to another family member, like a younger sibling.
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