If you’re choosing your college savings plan based solely on state tax breaks, then you’re doing it wrong.
More than 30 states, plus the District of Columbia, offer state tax breaks to residents for contributions to a 529 plan — the college savings account families use to save and pay for education on a tax-free basis. Indeed, 45 percent of parents said in-state tax incentives were a factor in their 529 plan selection, according to a survey from Strategic Insight.
But as convenient as it may be to invest in your state’s plan just for the tax break, experts actually warn against it.
Other factors matter, too, especially now that the Tax Cuts and Jobs Act allows families to tap a 529 plan to cover up to $10,000 in private elementary and high school expenses each year. As of Sept. 30, 2017, these plans held $282.2 billion in assets, Strategic Insight found.