Many states offer their residents tax incentives to invest in their own state’s 529 plan, but many do not. Meanwhile, other states offer tax parity, which allows residents to deduct contributions from their state income tax whether they invest in their own state’s plan or in another state’s plan.
Unfortunately, many families simply select their own state’s 529 plan by default even though there’s little or no added benefit in doing so. If your client lives in a state that offers tax parity or that provides no state tax benefit, you may want to explore attractive plans offered by other states, such as the New Mexico’s Scholar’s Edge® 529 plan.
If clients live in one of the 23 states that have no state income tax, that offer tax parity or have no in-state deduction, you should compare their state’s 529 plan with those offered by New Mexico. Let them know they have a choice.
The following nine states have no state income tax, so your clients are not restricted to an in-state plan:
- New Hampshire
- South Dakota
If clients live in one of the following eight states, they can choose to invest in any 529 plan because these states do not offer income tax deductions.
- New Jersey
- North Carolina
The remaining six states offer tax parity, meaning your clients can deduct a certain amount each year from their state income taxes even if they invest in a plan from another state.
- Arizona: $2,000 each year ($4,000 for a married couple filing jointly).
- Kansas: $3,000 per beneficiary each year ($6,000 for a married couple filing jointly).
- Maine: $3,000 each year ($6,000 for a married couple filing jointly).
- Missouri: $8,000 per beneficiary each year ($16,000 for a married couple filing jointly).
- Montana: $3,000 each year ($6,000 for a married couple filing jointly).
- Pennsylvania: $14,000 each year ($28,000 for a married couple filing jointly).
Learn more about the 529 plan managed by OppenheimerFunds by visiting www.ScholarsEdge529.com.
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