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 you live 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 New Mexico’s Scholar’s Edge® 529 plan and The Education Plan.

taxes

If you 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 your state’s 529 plan with those offered by New Mexico. You have a choice.

The following nine states have no state income tax, so you’re not restricted to your in-state plan:

  • Alaska
  • Florida
  • Nevada
  • New Hampshire
  • South Dakota
  • Tennessee
  • Texas
  • Washington
  • Wyoming

If you live in one of the following eight states, you can get the same tax benefits whether you invest in the 529 plan sponsored by your home state or another state’s plan because these states do not offer income tax deductions.

  • California
  • Delaware
  • Hawaii
  • Kentucky
  • Massachusetts
  • Minnesota
  • New Jersey
  • North Carolina

The remaining six states offer tax parity, meaning you can deduct a certain amount each year from your state income taxes even if you 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).

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