Which states offer the best 529 plans?
Many people assume you have to settle for the 529 plan from your home state, but that is not the case. You are free to choose a 529 plan from any state, but there are a few factors that you should consider when researching plans. #1 Does your state offer a tax deduction? Most states offer a generous tax deduction for contributing to your home state’s 529 plan. Depending on how much you contribute, this tax deduction could be significant, making it worthwhile to use your home state’s plan. Unfortunately, California is the only state in the nation that does not offer a tax deduction for contributing to a 529 plan. #2 Do you live in a state that doesn’t have income tax? If you live in Texas, Florida, Alaska, Nevada, South Dakota, Washington, or Wyoming, then you should definitely shop around for the best plan because you won’t benefit from a home-state tax deduction. The good news if you live in any of the aforementioned states is that there are quite a few excellent 529 plans to choose from. My favorite 529 plans include: Arkansas, Ohio, New York, and Utah because they have low cost investment options (such as Vanguard or DFA), are easy to use, and offer aged-based plans.