Saving for education can feel like a race against rising tuition costs, but 529 college savings plans offer families a powerful way to stay ahead. These state-sponsored programs combine tax advantages and flexible investment choices with long-term growth potential, making them one of the most effective tools for funding future education expenses. With dozens of plans available nationwide, choosing the best 520 plans can help you meet your savings goals so you do not fall short.
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. Prepaid tuition plans allow you to essentially buy credits at specific participating schools.
- Education savings plans. With education savings plans, you can open a 529 plan to 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 for 529 plans. 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 there are no taxes if you withdraw money for 529 qualified educational expenses, such as 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; instead, 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 for 529 Plans
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.
Choosing the Best 529 Plans
Selecting the right 529 plan begins with understanding your personal savings goals, tax status and investment strategy. Each state-sponsored plan has unique features, including different fee structures, investment options and potential in-state tax benefits.
For many families, the most compelling reason to choose their own state’s plan is the ability to deduct contributions from state income taxes. However, if your state offers no tax deduction or its plan is high in fees, it may be worth considering top-rated out-of-state options with better performance histories and lower costs.
Low fees are a critical factor because they directly impact how much of your money stays invested to grow over time. Plans managed by firms known for cost efficiency, such as Vanguard or Fidelity, can help maximize returns for a bigger tax return by minimizing administrative and investment expenses.
Performance also matters, but it should be evaluated over the long term to get a clearer picture of how consistently a plan delivers value. Look at five- to 10-year returns rather than short-term market swings.
Ultimately, the best 529 plans align most closely with your family’s timeline, tax strategy and comfort with investment risk. Whether you prioritize low fees, strong long-term performance, generous tax benefits or investment flexibility, taking the time to compare options can pay off significantly in the future. These are the best 529 plans overall, but keep in mind that some benefits might only be available if you live in the state of the plan.
Data and Methodology
We identified the plan options below through exhaustive research and analysis of the college savings and 529 market. They are listed in an order that’s in direct correlation with their individual composite score based on our methodology, which includes how much the accounts typically charge in fees and what the state tax benefit is for each plan.
You may have to live in the state the plan originated from in order to benefit from the state tax benefit, but that was not factored into the methodology ranking.
1. Illinois 529 Plan (Bright Start)
The Illinois 529 plan allows state residents to deduct up to $10,000 in annual contributions ($20,000 for if married filing jointly) 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 is 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 Dimensional Fund Advisors (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 with conservative, moderate and aggressive options. You can also 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%.
2. Michigan 529 Plan (Michigan Education Savings Program)
The Michigan 529 plan holds a silver rating from Morningstar. With a contribution limit of $500,000, it allows Michigan taxpayers to lower state taxable income by up to $10,000 annually. It also offers a guaranteed investment option on its menu. Plus, with no annual asset-based fee, it is a plan designed for investors with very low risk tolerances or those whose beneficiaries are nearing their college years.
This plan 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 0.185%.
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.
3. 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 saveres.
Your investment options include 22 Target Enrollment Portfolios s 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 $190,000. Employers can also set up payroll deductions toward employees’ 529 plan accounts at no cost to the company.
4. Pennsylvania 529 Investment Plan
The Pennsylvania 529 Investment Plan (IP) is a two-time Gold-rated 529 plan by Morningstar, offering families a flexible and tax-advantaged way to save for future education expenses.
Operated by the Pennsylvania Treasury Department and managed by Vanguard, the plan features a diverse selection of low-cost investment options designed to suit a variety of risk tolerances and time horizons. Unlike some state-specific plans, Pennsylvania’s 529 IP is available to residents nationwide, making it an appealing choice for savers seeking strong investment performance and broad accessibility.
One of the plan’s standout features is its range of portfolio choices, from age-based tracks that automatically adjust asset allocations through portfolio rebalancing as a student approaches college to static options that allow investors to maintain a preferred balance of stocks, bonds and cash.
Vanguard’s management means the investment lineup benefits from a respected reputation that is known for its low fees and disciplined index-based strategies. Over time, these low costs can make a significant difference in account growth, especially for families starting to save early.
While anyone can invest in the Pennsylvania 529 IP, in-state residents enjoy an additional perk. Contributions of up to $18,000 per beneficiary per year ($38,000 for married couples) are deductible from Pennsylvania state income tax.
These deductions, combined with federal tax-free growth and withdrawals for qualified education expenses, enhance the plan’s overall value. The plan also covers a wide range of expenses, including tuition, room and board, books and certain apprenticeship and K–12 costs, giving savers more flexibility in how they use the funds.
5. Virginia 529 Plan (Invest529)
Investment-research firm Morningstar has awarded the Virginia Invest529 Plan a Bronze 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 0.020% to 0.554%.
To boost savings, Virginia residents can deduct up to $4,000 in annual 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 types, 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 foreign 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 0.510%.
6. Utah 529 Plan (My529)
This Morningstar Gold-rated plan stands as one of the highest allowable 529 contributions in the country. Unlike several of the best 529 plans, the direct-sold Utah 529 plan does not require a minimum contribution; instead, you can open an account with as little or as much as you like, up to $574,000. Once you reach that level, your money still grows tax-free. Utah residents, in particular, may take a 4.55% income tax credit on their contributions, up to a certain limit.
In addition, the My529 Plan offers a diverse range of investment types, such as age-based investment options. These portfolios automatically change their asset allocation to generally reduce risk 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.
Overall, the My529 Plan offers something for all types of savers. Most investment options are built with low-cost index funds from Vanguard with more actively managed options available from DFA Funds. Pacific Investment Management Company (PIMCO) also provides plan management.
Total annual asset-based fees range from 0.388% to 0.199%, depending on the investment options you choose.
7. Nevada 529 Plan (Vanguard 529 Plan)
There is a choice of six 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. The total asset-based expense ratio ranges from 0.142% to 0.42%. Additionally, a minimum contribution limit applies, requiring $500 from Nevada residents and $1,000 from non-residents. There is also a $500,000 lifetime maximum contribution..
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.
8. California 529 Plan (ScholarShare)
The California 529 Plan, known as ScholarShare, is a robust and competitively priced education savings program available to both residents and nonresidents.
Administered by the ScholarShare Investment Board and managed by TIAA-CREF Tuition Financing, Inc., the plan stands out for its wide selection of investment options and absence of an annual account maintenance fee. ScholarShare has earned strong marks for its combination of low costs, ease of use and transparent structure, making it a worthy contender for families seeking a straightforward, growth-focused savings vehicle.
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%. Because of this, ScholarShare offers one of the lowest non-guaranteed portfolio options of any 529 plan.
9. 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 their college years.
Total annual asset-based fees range from 0.38% to 0.67%.
10. New Hampshire UNIQUE Plan
The New Hampshire UNIQUE College Investing Plan lives up to its name by offering a distinctive combination of strong investment options, low costs and broad accessibility.
Sponsored by the state of New Hampshire and managed by Fidelity Investments, the plan is open to savers across the country and has earned a reputation for straightforward, diversified portfolios. With no residency requirement and a user-friendly online platform, it is a popular choice for families who value both performance and ease of management.
At the heart of the UNIQUE Plan is a suite of portfolios managed by Fidelity, ranging from age-based tracks that gradually shift from equities to more conservative investments as college nears, to static strategies for those who prefer a consistent asset allocation.
Fidelity’s active and index-based investment expertise provides investors with a balance of growth potential and risk management. For hands-off savers, the age-based approach offers a simple, set-it-and-forget-it strategy that automatically adapts to a student’s timeline.
While New Hampshire does not levy a state income tax and therefore does not offer a state-specific deduction, the UNIQUE Plan’s federal tax advantages remain a powerful incentive. Contributions grow tax-deferred, and withdrawals for qualified education expenses, covering everything from tuition and fees to room, board and certain K–12 costs, are tax-free.
These benefits, combined with the plan’s broad eligibility, make it especially attractive for out-of-state investors who prioritize low fees and strong investment performance over state-specific tax perks.
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 pay off 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 college savings plans. Here is a college savings plan comparison table to help you make the right choice for you:
Savings Option | Advantages | Drawbacks |
529 Plan | Tax-free growthState tax deductions in many statesHigh contribution limitsCan transfer to another beneficiary | Funds must be used for qualified education expenses or face taxes + penalties |
Custodial Account (UGMA/UTMA) | No contribution limitsCan be used for any purpose benefiting the child | Assets count more heavily against financial aidChild gains full control at age of majority |
Coverdell ESA | Tax-free growthBroader range of investment choicesCan also cover K–12 expenses | Low annual contribution limit ($2,000/year)Income limits on contributors |
Regular Brokerage Account | No restrictions on how the money is usedUnlimited contributions | No tax advantagesPotential capital gains taxes on earnings |
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. 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 generous 529 plan benefits with major tax incentives and high 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. By weighing each plan carefully, you can select a plan that not only supports your education savings goals but also adapts to the evolving needs of your family.
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. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel 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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