Best 529 Plans for 2023 and Beyond

With student loan debt at record levels, American families are seeking more ways to help their children save for higher education – and sooner rather than later. A 529 college savings plan is a popular way to save for your child’s education, but there are several tax implications to consider. This is what you need to know about the best 529 plans so you can determine which one is right for you. 

If you are planning for your family’s education, a financial advisor can help you create a financial plan to pay your education expenses.

What Is a 529 Plan?

A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs. Legally known as qualified tuition plans, they are sponsored by states, state agencies or educational institutions and are authorized by Section 529 of the Internal Revenue Code.

Generally, there are two types of 529 plans: prepaid tuition plans and education savings plans.

• Prepaid tuition plans allow you to essentially buy credits at specific participating schools. 
•  Education savings plans let you open an account you can use for a variety of future educational payments. 

The IRS does not impose yearly contribution limits. That is done by individual states, which base contribution limits on aggregate contributions. Some states, however, also impose annual contribution limits.

Each state, except Wyoming, sponsors at least one of these savings vehicles, as does Washington, D.C. Money you contribute to these plans comes from after-tax dollars, so your contributions can reduce your taxable income. Your money grows tax-free, and you will not face any taxes if you withdraw money for 529-qualified educational expenses like tuition.

Some states allow you to take additional tax deductions or credits based on how much you contribute. However, the advantage of a 529 plan is that you are not limited to investing in the 529 plan sponsored by your state; you are free to enroll in any program you wish. 

With that said, not all 529 plans are created equal. Some charge high fees and offer poorly performing investment options, which is why it is important to find the right one for your budget.

Federal Gift Tax Considerations

Although 529 plans are governed by state rules, you should still be aware of the federal gift tax exemption, which changes yearly.

In 2025, the annual gift tax exemption is $19,000. This means that a married couple can give $38,000 ($19,000 x 2) per recipient that year. For example, if a married couple has two children and six grandchildren, they may give $304,000 in 2025 without affecting their joint $27.98 million overall tax exemption, which is the $13.99 million estate tax exemption for 2025 multiplied by two.

How to Pick a 529 Plan

Once you decide on either a prepaid tuition plan or an education savings plan, consider the specific investment options and contribution rules that each plan offers. These best 529 plans are all popular options for a 529 plan, regardless of what state you live in.

1. Utah 529 Plan (My529)

Unlike several 529 plans, the direct-sold Utah 529 plan does not require a minimum contribution; you can open an account with as little or as much as you like. 

From there, you can contribute up to $574,000. This stands as one of the highest allowable 529 contributions in the country. Once you reach that level, your money still grows tax-free. Utah residents, in particular, may take a 4.5% income tax credit on their contributions, up to a certain limit.

In addition, the My529 Plan offers a diverse range of investment types. For instance, you can contribute toward age-based investment options. These portfolios automatically change their asset allocation to generally become less risky as your child approaches college. This allows you to exercise more caution as you approach the years when your child will need their savings the most.

However, the Utah 529 plan gives you a little more control over asset allocation than the typical 529 plan with age-based options based on specific risk levels. For example, you can invest in an age-based conservative or aggressive option. The latter will invest a larger portion of your money in more growth-oriented investments, such as stock funds. 

In addition, you can choose from age-based aggressive global or domestic funds. The former option diversifies your investments with domestic and non-domestic funds. You can also build your own portfolio with static investment options that keep a set asset allocation or customized investment options.

If you are unsure of your risk tolerance, you can use our asset allocation calculator. This will help you better visualize a potential investment mix based on your preferences.

Overall, the My529 Plan offers something for all types of savers. Most investment options are built with low-cost index funds from Vanguard and more actively managed options from DFA Funds. Total annual asset-based fees range from 0.388% to 0.199%, depending on the investment options you choose. If you are a Utah resident, you can also invest in the Public Treasurers Investment Fund with no total annual asset-based fee.

2. Virginia 529 Plan (Invest529)

Investment-research firm Morningstar has awarded the Virginia Invest529 Plan a silver rating for its low costs and high-quality investments.

In fact, this Virginia 529 plan, which has a $10 minimum contribution to get started, stands as one of the most fee-friendly options in the country. Estimated expense ratios, depending on the portfolio type, can range from 0.039% to 0.346%. To boost savings, Virginia residents can deduct up to $4,000 in contributions from individual state income taxes each year. You can contribute up to $550,000 to the state’s 529 plan.

In addition, the Virginia 529 plan offers a diverse range of investment options, including passive and actively-managed static portfolios. Actively managed funds aim to beat the market as opposed to passively managed options, which tend to track individual indexes of a certain asset class, such as international stocks or high-yield bonds. 

Plus, the plan also offers a real estate investment trust (REIT) portfolio, and, unlike several other 529 plans, you can also invest in an FDIC-insured portfolio. Just like FDIC-protected bank accounts, this option protects your funds up to $250,000 in the unlikely event the plan shuts down entirely. Annual asset-based fees range from 0.000% to 0.554%.

3. Illinois 529 Plan (Bright Start)

The Illinois 529 plan allows state residents to deduct up to $10,000 in annual contributions from their state income taxes. The maximum contribution limit is $500,000.

The plan also stands out for its robust investment menu. For instance, it’s one of the few plans that allow you to invest in multi-firm target portfolios. These options keep a set asset allocation while utilizing both active and passive investing strategies deployed by well-established firms, including BlackRock, T. Rowe Price and DFA. Index target portfolios follow a passive strategy and are composed of low-fee Vanguard funds.

Additionally, you can contribute to age-based portfolios that follow specific risk tracks. These are conservative, moderate and aggressive. You also have the option to build your own investment option using individual portfolios that offer exposure to asset classes like real estate, fixed income and international equity. 

Even better, the Illinois 529 plan features very reasonable fees. Annual asset-based fees range from 0.08% to 0.425%.

4. Nevada 529 Plan (Vanguard 529 Plan)

There is a choice of five different Nevada 529 plans but the standout remains the Nevada Vanguard 529 College Savings Plan. It is a low-cost 529 plan run by Vanguard that has no enrollment fees, transfer fees or commissions. A $500,000 maximum contribution limit applies. The total asset-based expense ratio ranges from 0.12% to 0.42%. 

There are two ways to set up your Nevada 529 Plan:

• Hands-off approach. Target Enrollment Portfolios (TEPs) are professionally managed plans that become more conservative as time of enrollment nears.

Hands-on approach. You can create an individual 529 portfolio to accommodate your risk tolerance from Vanguard’s menu of low-cost portfolios. Furthermore, this 529 plan allows you to enroll in programs designed to boost your savings. For instance, the Ugift program makes it easy for you to request donations from friends and family during special events, such as your child’s birthday. It also helps you earn rewards when you make purchases at popular retailers or restaurants. You can then easily transfer these rewards directly to your 529 plan account.

5. South Carolina 529 Plan (FutureScholar South Carolina 529 College Savings Plan)

South Carolina’s Future Scholar 529 Plan allows state residents to deduct up to $575,000 in contributions from their state tax returns each year. That is nearly unheard of in the 529 industry, making this plan among the most generous in the nation in terms of state tax benefits.

Additionally, the plan charges very reasonable fees. Unlike several other plans, the South Carolina 529 College Savings Plan charges no program management fee or account fee. In most cases, managers factor these fees into the total annual asset-based fee for each portfolio. Expense ratios, as of July 2025, span from only 0.06% to 0.14%. Also available is a Bank Deposit Portfolio with no asset-based fees, and 

Tthe South Carolina 529 Plan is one of the few offering portfolios made from low-cost exchange-traded funds (ETFs).

6. Michigan 529 Plan (Michigan Education Savings Program)

The Michigan 529 plan holds a silver rating from Morningstar. It has a contribution limit of $500,000 and offers a guaranteed investment option on its menu. 

With no annual asset-based fee, this is a plan designed for investors with very low risk tolerances or those whose beneficiaries are nearing their college years. It aims to preserve capital and provide a decent return by investing entirely in a funding agreement issued by TIAA-CREF Life to the Michigan Department of Treasury. According to the MESP website, “the minimum effective annual interest rate will be neither less than 1% nor greater than 3% at any time.”

In addition, you can invest in multi-fund portfolios designed for different risk profiles and objectives. Total annual asset-based fees for portfolios, except the funding agreement, range from 0.065% to 0.105%.

You can open a Michigan 529 plan with $25. Furthermore, the plan makes it easy to request eGifts so friends and family can contribute directly to your 529 plan account.

7. Maryland 529 Plan (Maryland College Investment Plan)

Even though the Maryland 529 Plan charges slightly higher fees than most of the plans on our list, an analysis by SavingforCollege ranks it among the top-performing 529 plans in the country.

Leading asset-management firm T. Rowe Price manages underlying funds in the plan’s portfolios. All you need to open an account is $25, and you can contribute up to $500,000 toward your account moving forward. Maryland residents are then able to deduct up to $2,500 in contributions ($5,000 for couples filing jointly) from their state income tax each year.

One of your investment options includes a U.S. Treasury Money Market Portfolio designed for low-risk investors. You can also contribute toward Enrollment-Based Portfolio options. These change their asset allocation automatically to become less risky as your child approaches the college years.

Total annual asset-based fees range from 0.13% to 0.67%.

8. California 529 Plan (ScholarShare)

Even though the direct-sold California 529 plan does not offer state-specific tax breaks, it receives a 4.5 out of 5.0- rating from SavingforCollege for its performance. Well-established firm TIAA-CREF manages underlying funds in the plan’s portfolio.

The plan, which has a maximum contribution limit of $529,000, includes age-based, multi-fund and single-fund portfolios, as well as a guaranteed investment option. To help, the program manager keeps costs down. Total annual asset-based fees stretch from 0.04% to 0.39%. In fact, ScholarShare offers one of the lowest non-guaranteed portfolio options of any 529 plan.

9. New York 529 Plan (New York’s 529 College Saving Program)

The New York 529 College Savings Program has reduced the total annual asset-based fee on all its portfolios to 0.11%. This makes the New York 529 plan one of the most inexpensive in the nation. In addition, New York families can deduct up to $10,000 from their state income tax each year. Unlike most 529 plans, the program does not charge additional fees for out-of-state participants. 

Your investment options include three age-based portfolios based on specific risk profiles. In addition, you can build your own investment mix using individual portfolios. These provide exposure to asset classes, such as stock funds, short-term reserves and mixes of multiple classes.

There is no minimum requirement to open a New York 529 plan, and you can contribute up to $520,000. This is one of the largest 529 maximum contribution limits in the country. Employers can also set up payroll deductions toward employees’ 529 plan accounts at no cost to the company.

What Happens to Your 529 if Your Child Doesn’t Go to College?

One of the most common concerns parents have is: What if my child decides not to go to college? 

Fortunately, a 529 plan offers flexibility, even if your original beneficiary does not use the funds. If your child does not attend college, you have several options.

• Transfer the account to another family member: You can change the beneficiary to a sibling, cousin, spouse or even yourself without tax penalties.
  
• Use the funds for graduate school: If your child eventually decides to pursue a master’s or professional degree, 529 funds can still be used for tuition, fees and other qualified expenses.
  
• Use it for your own education: Parents can also become the beneficiary and use the funds for their own degree or training program.
  
• Withdraw the funds: If you take money out for non-qualified expenses, you will owe income tax on the earnings, plus a 10% penalty on those earnings (but not on the contributions).

Keep in mind that up to $10,000 of a 529 can also be used to repay student loans for the beneficiary or their siblings. While you will lose some of the tax advantages if you withdraw the funds for non-education purposes, the money you contributed is always yours.

529 vs. Other College Savings Options

While 529 plans are popular for education savings, they are not the only option. 

For most families, a 529 plan offers the best combination of tax benefits and flexibility. However, if you want more control over how funds are spent or you anticipate that your child will need funds for purposes beyond education, you might consider supplementing with a custodial account or brokerage account.

Bottom Line

Investing in a 529 plan is a great way to start saving for your child’s future college education as soon as possible, and there are some decent tax breaks, to boot. In addition, your child can still qualify for financial aid even if you have built a hefty 529 account balance over the years. Almost all states sponsor at least one of these plans, but they are not all great. The best 529 plans offer very generous 529 plan benefits with major tax incentives and high 529 plan contribution limits. Moreover, they provide a diverse investment menu. No rule says you have to invest in one sponsored by your state, so be sure to shop around.

Work with a financial advisor who can help you find the best 529 plan for you based on your child’s education needs.

Tips on 529 Plan Investing

• If you’re looking for ways to invest in your family’s education, a financial advisor can help you create a financial plan. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Tax breaks are some of the strongest incentives for investing in a 529 plan. However, there are some 529 plan rules you must follow in order to make the most out of your savings. For instance, you have to use your withdrawals on 529 plan qualified expenses. Otherwise, you’ll face some major tax penalties.

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