Skip to Content
Fund Spy

When It Comes to 529s, How Good Is Your State's Tax Benefit?

We examine the incentives that college savers have to stay in-state.

One of the most important choices that investors face when choosing among the more than 50 state-sponsored direct-sold 529 college savings plans is whether to stick with their state's plan or shop around for a better option. Morningstar Analyst Ratings for college savings plans compare programs nationally, since most U.S. residents do have an incentive to shop around, which means we do not consider state-specific incentives when evaluating them. In this article, we'll look at the incentives that college savers have to stay in-state.

Investors who live in states with no incentives to stay, such as state income tax benefits, should look nationwide for the best plan regardless of state affiliation. Indeed, college savers are not restricted to their state's 529 plan. About 42% of the U.S. population resides in one of 16 states that do not have a state tax benefit to entice them to stay in-state, so those investors have the 529 world as their oyster. Another 12% of residents live in seven states that offer tax benefits regardless of which state's 529 plan their residents choose (called tax parity), which gives residents the same freedom of choice. But the 46% of Americans in the remaining 27 states receive tax incentives to stay in state, a benefit that can significantly increase their college nest egg.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.