Can I Have 529 Plans From Multiple States?

Reviewed by Chris Stack, Esq. | December 18, 2023

Reviewed by Chris Stack, Esq. | December 18, 2023

Yes, you can have 529 plans in multiple states. Most 529 savings plans have no state residency requirements. You can open accounts in as many of these states as you want, although in most cases, there is little reason to have accounts in more than one or two states.

Benefits of contributing to 529 plans in multiple states

One benefit of opening 529 plans in more than one state is you can contribute beyond a single state’s contribution limits. Theoretically, you can contribute the maximum amount that each state allows.

The IRS does not require states to count an investment in other states’ 529 plans when applying their contribution limits. And there is no “contribution police” out there looking for people intent on using multiple states to stuff hundreds of thousands of dollars into 529 plans as a kind of tax shelter. But you are looking for trouble if you contribute more on an aggregate basis than you can reasonably argue might be needed for your beneficiary’s future higher education costs. 

Of course, between a pricey private college, medical school, and then business school, you can support the need to save a pretty hefty sum. However, a state will not want to see its program misused as a tax shelter (its tax status as a 529 plan could be threatened). If a state determines that you have made contributions without the intent to use the account for college it will terminate your account and perhaps assess an extra penalty.

Aside from contribution limits, you may wish to diversify your investment choices with varied 529 plans. For example, the Vanguard 529 College Savings Plan, offered by Nevada, is open to residents of any state. Opening a Vanguard 529 could expand your investment options from what your home state’s plan offers.

Downsides to contributing to 529 plans in multiple states

There are some downsides to contributing to 529 plans in different states. First, all but nine of the 30-plus states offering a tax deduction for contributions require 529 contributions to an in-state plan. Any contributions to an out-of-state plan won’t receive state tax benefits in these states. 

Aside from this, opening 529 plans in multiple states can make managing your accounts more complicated. You’ll need to keep track of rules and investments in multiple accounts compared to just one.

Are 529 plans transferable between states?

If you have 529 plans in multiple states but then decide to consolidate plans, you can roll over funds from one state’s 529 plan to another. However, there may be state tax consequences of doing so. 

Currently, 18 states provide state income tax benefits for rollover contributions from your existing 529 plan to your new 529 plan. This can benefit rolling over 529 plans to a new state if you’re eligible for these tax breaks.

On the downside, more than 15 states penalize outbound 529 plan rollovers to another state. Some states “recapture” state income tax deductions or credits previously claimed when 529 plan funds are rolled into another state’s 529 plan. 

A good place to start:

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