You can choose any 529 plan, regardless of the state where you live or the state where your beneficiary might attend college. With the exception of Wyoming, each state has its own option for 529 plans, and each plan has different rules, contribution limits, investment options, and tax regulations.
For example, if you live in Ohio, you can deduct up to $4,000 per beneficiary per year on your state taxes, plus unlimited carryforward (in addition to the typical tax advantages of contributing to a 529). That means that if you contribute more than $4,000 for one beneficiary in a certain year, you can claim that tax benefit in future years.
Meanwhile, contributions in Pennsylvania are state-tax deductible up to $15,000 per beneficiary per year, and as what’s called a “tax parity state,” you can claim these advantages even if you use a plan from another state. A married couple can deduct up to $30,000 per beneficiary per year as long as both individuals earn at least $15,000 in taxable income. Additionally, the total value of the 529 plan is exempt from inheritance tax. The assets won’t be counted if your child applies for financial aid from the state of Pennsylvania (whereas other 529s would be considered), and you can designate part or all of your state tax refund to go directly into your 529 plan. Finally, if you choose this plan, your student will be eligible for tuition discounts to over 300 private colleges around the world through the SAGE Scholars Tuition Rewards program.
In Maryland, someone who contributes to a future student’s 529 plan can deduct up to $2,500 from their Maryland taxes per beneficiary, per plan type, per year, with carryforward up to 10 years. “Per plan type” means that a parent could contribute to a college savings plan and a prepaid college trust plan for the same beneficiary and deduct up to $2,500 for each. A married couple could deduct up to $10,000 per year on their Maryland taxes for a single beneficiary.
Compare that to Iowa, where taxpayers can deduct up to $3,474 in state taxes per beneficiary in 2021, a number that is adjusted for inflation each year. A married couple with two kids can deduct a total of $13,896 in 2021 on their Iowa tax return. Additionally, as with all 529 plans, you can contribute up to $75,000 per year per beneficiary without exceeding the gift tax exclusion, which you typically risk after gifting $15,000 to one person. You just have to make sure that you don’t make any further contributions for that beneficiary for the following four years.