529 Plan Tax Deduction by State: How Much You Save in 2026
Every state's 529 tax deduction or credit for 2026, including deduction limits, credit amounts, and estimated annual tax savings at median state rates.
Updated April 2026. (*) = allows deduction for any state's plan.
Federal law provides no income tax deduction for 529 contributions. The federal benefit is tax-free growth on the back end. State tax benefits vary enormously: Indiana's 20% credit saves up to $1,500 per year, while California, New Jersey, and five other states offer nothing. The table below shows your estimated annual tax savings by state at a $10,000 contribution level.
Indiana: Best-in-Class Tax Credit
Indiana's 20% state tax credit is the most generous 529 tax benefit in the country for most contributors. Contribute $7,500 to a CollegeChoice 529, get $1,500 back as a direct credit against your state income tax bill. Over 18 years of maximum contributions, that is $27,000 in tax credits returned directly to you, before counting the tax-free investment growth. Unlike deductions, credits deliver the same benefit regardless of your marginal tax rate.
State-by-State Tax Benefit Table (2026)
| State | Type | Single Limit | Joint Limit | Est. Tax Savings | In-State Only? |
|---|---|---|---|---|---|
| Alabama | Deduction | $5,000 | $10,000 | $250/$500 | Yes |
| Arizona | Deduction* | $2,000 | $4,000 | $50/$100 | No |
| Arkansas | Deduction* | $5,000 | $10,000 | $245/$490 | No |
| Colorado | Deduction | Unlimited | Unlimited | 4.4% of contribution | Yes |
| Connecticut | Deduction | $5,000 | $10,000 | $350/$700 | Yes |
| Georgia | Deduction | $4,000 | $8,000 | $220/$440 | Yes |
| Idaho | Deduction | $6,000 | $12,000 | $348/$696 | Yes |
| Illinois | Deduction | $10,000 | $20,000 | $495/$990 | Yes |
| Indiana | Credit (20%) | Max $7,500 contribution | Max $7,500 contribution | Up to $1,500 | Yes |
| Iowa | Deduction | $3,785/beneficiary | $3,785/beneficiary | $227/beneficiary | Yes |
| Kansas | Deduction* | $3,000 | $6,000 | $171/$342 | No |
| Louisiana | Deduction | $2,400 | $4,800 | $102/$204 | Yes |
| Maryland | Deduction | $2,500 | $5,000 | $144/$288 | Yes |
| Massachusetts | Deduction | $1,000 | $2,000 | $90/$180 | Yes |
| Michigan | Deduction | $5,000 | $10,000 | $213/$425 | Yes |
| Minnesota | Credit or Deduction* | $3,000 credit or $6,000 ded. | $3,000 credit or $6,000 ded. | Up to $3,000 | No |
| Mississippi | Deduction | $10,000 | $20,000 | $500/$1,000 | Yes |
| Missouri | Deduction* | $8,000 | $16,000 | $396/$792 | No |
| Montana | Deduction* | $3,000 | $6,000 | $203/$405 | No |
| Nebraska | Deduction | $10,000 | $10,000 | $584 each | Yes |
| New Mexico | Deduction | Unlimited | Unlimited | 5.9% of contribution | Yes |
| New York | Deduction | $5,000 | $10,000 | $343/$685 | Yes |
| North Dakota | Deduction | $5,000 | $10,000 | $125/$250 | Yes |
| Ohio | Deduction* | $4,000/beneficiary | $4,000/beneficiary | $150/beneficiary | No |
| Oklahoma | Deduction | $10,000 | $20,000 | $475/$950 | Yes |
| Oregon | Credit or Deduction | $300 credit or $2,445 ded. | $300 credit or $4,890 ded. | Up to $300/$600 | Yes |
| Pennsylvania | Deduction* | $16,000/beneficiary | $16,000/beneficiary | $491/beneficiary | No |
| Rhode Island | Deduction | $500 | $1,000 | $30/$60 | Yes |
| South Carolina | Deduction | Unlimited | Unlimited | 6.5% of contribution | Yes |
| Utah | Credit (5%) | Unlimited | Unlimited | 5% of contribution | Yes |
| Vermont | Credit (10%) | Max $350 credit | Max $700 credit | Up to $350/$700 | Yes |
| Virginia | Deduction | $4,000/account | $4,000/account | $230/account | Yes |
| Washington D.C. | Deduction | $4,000 | $8,000 | $340/$680 | Yes |
| West Virginia | Deduction | Unlimited | Unlimited | 6.5% of contribution | Yes |
| Wisconsin | Deduction | $3,860/beneficiary | $3,860/beneficiary | $295/beneficiary | Yes |
States With No 529 Deduction
These states have income tax but offer zero 529 deduction or credit:
Residents should prioritize low-fee out-of-state plans like Utah my529 (0.10%) or Nevada Vanguard 529 (0.14%). Federal tax-free growth still applies.
States With No Income Tax
No state tax benefit, but also no state income tax on earnings:
Choose any state's plan freely. Focus on lowest expense ratios: Utah, Nevada, New Hampshire, Virginia all offer plans under 0.15%.
Tax Deduction vs Tax-Free Growth: Which Matters More?
Many families focus on the state tax deduction when picking a 529 plan, but the bigger benefit is tax-free growth over 18 years. Consider this comparison: A family in Illinois contributes $10,000 per year and deducts the full amount, saving $495 annually in state taxes. Over 18 years, that is $8,910 in cumulative state tax savings from deductions. Meanwhile, the same $10,000/year at 7% annual return grows to approximately $340,000. If held in a taxable brokerage account instead, the $240,000 in gains would trigger $36,000 in capital gains tax. The tax-free growth advantage ($36,000) is four times larger than the deduction benefit ($8,910).
This analysis shows that if you live in a no-deduction state like California, you lose some annual benefit but retain the far more valuable long-term tax-free growth. The case for a 529 plan does not depend on state deductions. They are a bonus, not the foundation of the strategy.