529 College Savings Plans
For 2013, the S&P 500 was up 32.4%; the average 529 college-savings plan returned 14% (source: Morningstar). Returns for 529 plans in 2013 ranged from -2% up to 34%, depending on state and available investment choices. Investment options and 529 annual fees vary from state-to-state. Investors can use pre-tax dollars to fund a 529 plan—plus 31 states provide some type of state income tax deduction. Annual fees vary from an average of 0.5% (direct signup) up to an average of 1.1% (using a financial advisor).
States With Tax Deductions for 529 Plans
State | Annual Deduction |
Alabama, Arkansas, Connecticut, Michigan, NY, North Dakota | Up to $5K ($10K joint return) |
Arizona | Up to $2K ($14K joint return) |
District of Columbia | Up to $4K ($8K joint return) |
Georgia | Up to $2K per beneficiary |
Illinois, Mississippi, Oklahoma | Up to $10K ($20K joint return) |
Indiana | 20% tax credit up to $5K |
Missouri | Up to $8K ($16K joint return) |
New Mexico, West Virginia | Contributions are fully deductible |
Pennsylvania | Up to gift-tax exclusion per beneficiary |
Colorado | Up to donor’s federal taxable income |
Nebraska | Up to $5K (single and joint return) |