Skip to Content
The Short Answer

529 Rollover Can Have Tax Impact--For Good or Bad

Some states offer tax incentives for transferring funds to in-state plans, and tax penalties for leaving them.

Question: I own a 529 college-savings account in another state but would like to take advantage of the tax break I can get on contributions to my home state's plan. If I roll over the funds from my out-of-state plan to an in-state one, is the rollover tax-deductible?

Answer: While saving for a child's future college costs is its own reward, the income tax break offered by many states is an added bonus you can take advantage of now. Thirty-four states offer some sort of tax deduction or tax credit for contributions made to a 529 plan, according to data from the College Savings Plans Network (seven states have no state income tax). But in all but five of those 34 states, the tax break is available only for contributions made to an in-state plan (Arizona, Kansas, Maine, Missouri, and Pennsylvania give residents a tax break for contributing to any state's plan).