529 Plan Tax Savings Calculator

A 529 has two tax advantages and they work on different timescales. The state income tax deduction, where your state offers one, pays off immediately. Tax-free growth pays off slowly and becomes the larger benefit the longer the money stays invested.

For a newborn the growth advantage dominates. For a fifteen-year-old it barely matters, and the state deduction is most of the case.

Check your own state first

Some states give a deduction for any 529, some only for their own plan, and some give none at all. A few recapture the deduction if you later roll the money to another state's plan. That detail decides whether to use your state's plan or the one with better funds and lower fees.

Fees eat the advantage

A plan charging 0.60% a year against one charging 0.10% gives up a meaningful share of the growth benefit above over fifteen years. Compare expense ratios before comparing tax breaks.

Non-qualified withdrawals

Earnings withdrawn for anything other than qualified expenses are taxed as income plus a penalty, and the state deduction may be recaptured. That risk is the price of the advantage — which argues for funding a 529 to a realistic target rather than the maximum.