THE BARATELLI INSTITUTE · Mentoring at Scale
FOR PARENTS & GRANDPARENTS · 529 PLAN DECISIONS

Your state's 529 deduction may justify in-state. Or it may not. Here's the math nobody runs.

34 states plus DC offer some kind of 529 tax deduction. The deduction caps range from $2,000 to unlimited. Some require an in-state plan, some allow any plan. Most in-state plans charge higher fees than best-of-breed competitors (Utah, Nevada, NY, Virginia). The right answer for your family depends on four numbers: your state's deduction cap, your state's marginal tax rate, your contribution plan, and the fee gap. Run them once.

Annual
Tax savings
18 Years
Compounded value
Fee Drag
In-state vs best
Verdict
Stay or switch
YOUR PLAN
1
Family situation
2
Contribution plans
3
State deduction rules
4
Investment choice & results
STAGE 1 OF 4

Family situation

Where you file matters more than where you invest. The state line on your tax return is what unlocks (or doesn't) a 529 deduction.

Where you file state income tax. This is the only state whose deduction rules apply to you.
Adjusted gross income from line 11 of your 1040. Used to flag AGI-phased states (notably NJ).
$
Your top state bracket. Illinois flat: 4.95%. CA top: 12.3% (but no 529 deduction). NY top: ~10.9%. Look up on your last return.
%
What this tool does. It compares two paths over the 18 years from birth to college start: (a) contributing to your in-state 529 to capture the state deduction, vs. (b) contributing to a low-cost out-of-state plan (Utah / Nevada / NY / Virginia are typical leaders) and skipping the deduction. The right answer is determined by deduction cap × your tax rate vs. fee gap × balance × years. Run it once.
STAGE 2 OF 4

Contribution plans

How much, for how many kids, for how many years. The deduction is per-tax-return per-year — so timing and account ownership matter.

Annual contribution per child
Kid 1 — age today
Annual contribution
$
Years until college (18 − age)
Kid 2 — age today
Annual contribution
$
Years until college
Kid 3 — age today
Annual contribution
$
Years until college
For balance projection. 5-6% is a reasonable long-horizon real-return assumption for a balanced age-based portfolio. We use this to project fee drag — not investment returns themselves.
%
Account owner matters for FAFSA: parent-owned = parent asset (good); grandparent-owned = student income on distribution (was bad pre-2024, neutral post-2024 FAFSA simplification).
STAGE 3 OF 4

Your state's 529 deduction rules

These are the headline rules for your state. Defaults can be overridden — but only do so if you've verified the current year cap with your state revenue department or the official plan website.

Illinois
Loading state rules…
Per-tax-return cap on 529 contributions deductible from state taxable income. Leave at state default unless you've verified a recent change.
$
Some states cap per beneficiary (better — scales with kids), some cap per return regardless of how many kids. Driven by state default.
~14 states have "parity" — any 529 plan qualifies. The rest require the state's own plan.
Indiana & Minnesota offer a credit (% of contribution) instead of a deduction. Most are deductions (reduce taxable income).
Indiana: 20%. Minnesota: 50% of first $1,500 (AGI-phased). Vermont: 10%. Oregon: tiered.
%
Indiana credit caps at $1,500. Minnesota at $500. Vermont at $250.
$
Edge cases to verify with a CPA. Some states allow superfunding (5-year election under IRC §529(c)(2)(B)) for the deduction in year 1. Some states recapture the deduction if you transfer to an out-of-state plan or take a non-qualified withdrawal. NJ deduction is AGI-limited ($200K cap). MN credit phases out at higher AGI. K-12 deductibility for $10K/year is state-specific (~half of deduction states allow it, half don't).
STAGE 4 OF 4

Investment choice — in-state vs best-of-breed

The fee gap between an average state 529 and the lowest-cost national plans (Utah, NY, Nevada, Virginia) is usually 10-40 bps of total expense ratio. Over 18 years on a growing balance, that compounds.

Total fund + plan fee. Default 0.35% — middle-of-pack state plan. Some IL/NY/VA/UT plans run 0.05-0.15%; some smaller-state plans run 0.50-0.80%.
%
Utah my529 index, Nevada Vanguard, NY 529 Direct, Virginia Invest529 — typically 0.10-0.15% total. Default 0.12%.
%
WANT THE METHODOLOGY BEHIND THIS TOOL?
This calculator pairs with Money Reality HS Edition and Family Office Guide.
The tool gives you the 529 state-deduction math. The guides give you the surrounding decision — vehicle selection (529 vs Roth vs UTMA), FAFSA mechanics, merit-aid timing, grandparent-funded plans, generation-skipping considerations, and how to size education savings against actual school sticker prices.
Methodology references: Money Reality HS Edition Ch 6 (Funding college without going broke) and FO Guide Ch 7 (Multi-generational education funding).
Read Money Reality HS Edition → Browse all guides
PROFESSIONAL DISCLAIMER · PLEASE READ

Educational and informational purposes only. This calculator and any output it produces are intended solely for general educational and decision-support purposes. They do not constitute investment, tax, legal, accounting, or any other professional advice, and they do not create a fiduciary, attorney-client, accountant-client, or advisor-client relationship of any kind.

Estimates based on your inputs. All results are estimates derived from the data and assumptions you provide. State 529 rules change frequently — deduction caps, parity status, carryforward rules, recapture provisions, and AGI phase-outs are all subject to legislative update. The state-rules table built into this tool reflects rules as of the build date and may be out of date. Always verify the current year cap and rule with the official state 529 plan website and a CPA before contributing.

FAFSA and federal-tax rules change too. The FAFSA Simplification Act (effective 2024-25 award year) materially changed how grandparent-owned 529s are treated. Federal Secure Act 2.0 added the 529-to-Roth rollover. Both are subject to future legislative change. Verify before relying.

Consult your own qualified professionals. This is not tax, legal, or financial advice. Before acting on anything calculated here, consult your own attorney, CPA, or financial advisor licensed in your jurisdiction who has reviewed your specific facts and applicable current law.