See what a 529 is actually worth: your state's capped deduction, tax-free growth against a taxable account, and the cost of a non-qualified withdrawal.
State rules here are read from each state's own tax authority. If your state is not listed, choose the last option and enter your own annual deduction limit.
The taxable comparison assumes a 1.5% dividend yield taxed every year at the capital gains rate, with the remaining gain taxed on sale. That annual drag is the part most 529 comparisons leave out.
Caps are shown single / married filing jointly where they differ. Pennsylvania's limit tracks the federal annual gift tax exclusion, currently $19,000.
| State | Annual deduction | How it works |
|---|---|---|
| New York | $5,000 / $10,000 | New York's own plan only; deduction is recaptured on rollovers, non-qualified withdrawals and K-12 tuition. |
| Virginia | $4,000 | Per account, not per return. Unused amounts carry forward, and contributors aged 70 or over may deduct the full amount. |
| New Jersey | $10,000 | NJBEST only, and only if gross income is $200,000 or less. |
| Pennsylvania | $19,000 / $38,000 | Per beneficiary, per taxpayer, and any state's plan qualifies — one of the few tax-parity states. |
| Illinois | $10,000 / $20,000 | Bright Start, Bright Directions and College Illinois only; other states' plans do not qualify. |
| California | None | No deduction. California also adds a 2.5% state tax on non-qualified earnings and does not conform to the 529-to-Roth rollover or K-12 distributions. |
These states levy no individual income tax, so a 529 deduction has nothing to reduce: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming.
Other states are not listed because their rules could not be read from an official source. Published comparison tables disagree with one another, so rather than repeat a figure that might be wrong, the last option lets you enter your own limit.
This is an educational estimate, not tax or investment advice. State rules change, tax brackets depend on your full return, and investment returns are not guaranteed. Confirm your state's treatment with its tax authority or a tax professional.
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A 529 is not an investment — it is a wrapper around one. Its value is entirely in the tax treatment: growth that is never taxed if the money goes to education, a state income tax deduction in most states that levy one, and a penalty if it is spent on something else. This calculator prices all three, using the deduction limit your state actually publishes rather than assuming every dollar you contribute is deductible.
Two separate benefits are added. The first is tax-free growth: the same contributions are run through a taxable brokerage account holding the same portfolio, which pays tax on distributed dividends every year and capital gains tax on the remaining gain at sale. The difference is what the federal treatment is worth. The second is the state deduction, which is capped — the deductible portion of your contribution is multiplied by your marginal state rate, not the whole contribution.
529 advantage
See the dollar advantage over a plain brokerage account before committing money to an account with strings attached.
If your state caps the deduction, the calculator shows exactly where the extra stops earning a state benefit.
Most states only give the deduction on their own plan. Pennsylvania is one of the few where any state's plan qualifies.
See what a non-qualified withdrawal would cost, and how much could instead roll to the beneficiary's Roth IRA.
New York stops at $5,000 ($10,000 jointly), Illinois at $10,000 ($20,000 jointly). Contributing more is still worth doing, but the extra earns no deduction.
Nine states have no income tax at all, and California has an income tax but no 529 deduction — plus a 2.5% surtax on non-qualified earnings.
Dividends are taxed as they are distributed, so a taxable account compounds on a lower return. Comparisons that only tax the final gain understate what the 529 is worth.
On a non-qualified withdrawal, the 10% additional tax and income tax apply to the earnings portion. Your own contributions come back untouched — the most misunderstood fact about 529s.
Never on your federal return. Most states with an income tax offer a deduction or credit, but almost all cap it: New York allows $5,000 ($10,000 filing jointly), Illinois $10,000 ($20,000), New Jersey $10,000 but only if gross income is $200,000 or less, and Virginia $4,000 per account with a carryforward. California offers no deduction at all.
You have several options before paying a penalty: change the beneficiary to another family member, use it for an apprenticeship or postsecondary credential, apply up to $10,000 to student loans, or roll up to $35,000 into the beneficiary's Roth IRA. If you simply withdraw the money, income tax and a 10% additional tax apply to the earnings only — your contributions come back tax-free.
Yes, under section 529(c)(3)(E). The account must have been maintained for 15 years, contributions made in the last 5 years are not eligible, each year's rollover is capped at the Roth IRA contribution limit — $7,500 for 2026 — and the lifetime maximum is $35,000. California does not conform to this provision, so a California resident may owe state tax on the rollover.
There is no annual contribution limit, but contributions are gifts. The 2026 annual gift tax exclusion is $19,000 per beneficiary ($38,000 from a married couple). A five-year election lets you front-load five years at once — up to $95,000, or $190,000 from a couple — without using lifetime exemption.
Yes, and the limit doubled. The One Big Beautiful Bill Act raised the annual K-12 distribution limit from $10,000 to $20,000 for tax years beginning after 31 December 2025, and expanded qualified K-12 expenses to include curriculum materials, books, online materials, tutoring, standardized test fees, dual enrollment and educational therapies. Some states, including California, do not conform.
For money that will be spent on education, almost always — a taxable account pays tax on dividends every year and capital gains tax at the end, while a 529 pays neither. The calculation flips only if there is a real chance the money will be spent on something else, since that is where the 10% additional tax on earnings applies.
If your state gives a deduction only for its own plan — as New York, Illinois, New Jersey and Virginia do — the deduction usually outweighs modest differences in fees. In a tax-parity state such as Pennsylvania, any state's plan qualifies, so you are free to choose on cost and investment options alone.
A parent-owned 529 is treated as a parental asset on the FAFSA, assessed at a maximum of 5.64% — far gentler than the 20% rate applied to a student's own assets. Distributions from a grandparent-owned 529 no longer count as student income under the current FAFSA rules.
Its narrowness. The money is committed to education, and taking it out for anything else costs income tax plus a 10% additional tax on the earnings, and in some states a recapture of deductions already claimed. Investment choice is also limited to what the plan offers.
Yes, in most states it is an annual deduction on that year's contributions, not a one-off. That is why the calculator multiplies the capped annual deduction across the whole horizon — and why contributing steadily up to the cap each year is usually better than one large lump sum.