529 College Savings Projector
Model contributions, growth, and state tax savings. Compare to a taxable brokerage.
How 529 plans work
A 529 plan is a tax-advantaged investment account designed for education expenses. You contribute after-tax dollars, the money grows tax-free, and withdrawals are tax-free when used for qualifying education costs (tuition, fees, room, board, books, computers). Many states also offer a state income tax deduction or credit on contributions, which is an immediate return on investment that no other education savings vehicle provides.
The plan is owned by a parent or grandparent (the account owner) on behalf of a beneficiary (the student). The owner controls the investments and withdrawals. The beneficiary can be changed to another qualifying family member at any time, which provides flexibility if college plans change.
State tax benefits: the $0–$500+/year edge
More than 30 states offer a tax deduction or credit for 529 contributions. The value ranges from zero (states with no income tax or no 529 benefit) to several hundred dollars per year. For a family contributing $5,000 annually in a state with a 6% marginal rate and a $5,000 deduction cap, the tax benefit is $300 per year — money that effectively reduces the cost of the contribution.
Some states (Arizona, Kansas, Minnesota, Missouri, Montana, Pennsylvania) allow the deduction for contributions to any state’s 529 plan, not just their own. This means you can shop for the lowest-fee plan nationally and still capture the state benefit. Other states require contributions to their in-state plan. Check the note that appears below the results for your state’s specific rules.
529 vs custodial brokerage: tradeoffs
A 529 plan offers tax-free growth and state deductions but restricts withdrawals to education expenses (with a 10% penalty + income tax on growth for non-qualified use). A custodial brokerage account (UTMA/UGMA) offers full flexibility — the money can be used for anything — but gains are taxable, and the account becomes the child’s property at the age of majority (18 or 21 depending on state).
The comparison toggle in this calculator shows both scenarios side by side. For most families who are confident about college, the 529’s tax advantages produce a meaningfully larger balance. For families who want flexibility, the taxable brokerage avoids the education-expense restriction at the cost of paying capital gains tax.
In-state vs out-of-state 529 plans
If your state requires in-state plan contributions for the tax deduction, use your state’s plan unless its fees are unusually high (above 0.50% annually). The tax deduction typically outweighs moderate fee differences. If your state allows deductions for any plan — or offers no deduction — compare expense ratios across plans. Nevada (Vanguard), New Hampshire (Fidelity), and Utah (my529) consistently rank among the lowest-cost options.
When 529 is the wrong choice
If college is uncertain and flexibility matters more than tax savings, a taxable brokerage or Roth IRA may be more appropriate. If your state has no deduction and your in-state plan has high fees, you lose the state benefit and pay more in expenses. If you are a lower-income family, direct financial aid and grants may cover college costs without a savings vehicle — consult the FAFSA estimator before committing to a savings strategy.
Qualifying expenses
Qualified 529 expenses include: tuition and fees at accredited institutions, room and board (up to the school’s cost of attendance), books, supplies, computers and related equipment, internet access, and special needs services. Since 2017: K–12 tuition up to $10,000/year. Since 2019: student loan repayment up to $10,000 lifetime per beneficiary. Since 2024: Roth IRA rollovers up to $35,000 lifetime.
Non-qualified withdrawals
If you withdraw for non-education purposes, the growth portion is subject to federal income tax plus a 10% penalty. Contributions come out tax-free always (they were after-tax going in). State tax recapture may also apply if you previously claimed a deduction. The penalty is significant but only applies to the gain, not the total balance — you never lose your principal.
Frequently asked questions
Is a 529 worth it if my state has no deduction?
It can be. The federal benefit — tax-free growth and tax-free withdrawals for qualified education expenses — applies regardless of state. Over 18 years, tax-free compounding on a $300/month contribution at 6% return saves roughly $15,000–$20,000 compared to a taxable brokerage. The state deduction is a bonus, not the only reason to use a 529.
Can I change the beneficiary later?
Yes. You can change the beneficiary to another qualifying family member (sibling, cousin, parent, even yourself) at any time without tax consequences. Since 2024, unused 529 funds can also be rolled into a Roth IRA for the beneficiary (subject to annual Roth contribution limits and a $35,000 lifetime cap).
What if my kid doesn’t go to college?
You have options: change the beneficiary to another family member, use the funds for qualifying K–12 tuition (up to $10,000/year), repay student loans (up to $10,000 lifetime), use for apprenticeship programs, or roll into a Roth IRA (2024+). Non-qualified withdrawals incur income tax plus a 10% penalty on the growth portion only — contributions come out tax-free.
Can I use 529 funds for K–12 tuition?
Yes, up to $10,000 per year per beneficiary for tuition at elementary and secondary schools, including private and religious schools. This was added by the Tax Cuts and Jobs Act of 2017. Not all states conform to this provision for state tax purposes — check your state’s rules.
Does a 529 affect financial aid?
Parent-owned 529 plans are reported as parental assets on the FAFSA, which has a lower impact than student assets (roughly 5.6% of parent assets vs 20% of student assets affect the Expected Family Contribution). Grandparent-owned 529s are no longer counted as student income on the simplified FAFSA (effective 2024–25 cycle).
How do I pick a 529 plan?
If your state offers a meaningful tax deduction for in-state plans, start there — the tax benefit usually outweighs small fee differences. If your state has no deduction (or allows deduction for any plan), compare expense ratios. Low-cost plans from Vanguard (Nevada), Fidelity (New Hampshire), and other providers typically charge 0.10–0.20% annually. Avoid plans with high fees or advisor loads unless there is a specific reason.
What happens to leftover money?
Change the beneficiary to another family member, hold it for graduate school, or roll up to $35,000 into a Roth IRA for the beneficiary (the 529 must have been open at least 15 years). Non-qualified withdrawal is the last resort: you’d pay income tax and a 10% penalty on the growth portion only.