Get a Break on College Costs

Even if your child is already in school, you can reap big state-tax benefits by feeding a 529 plan.

Some people have been stashing money in 529 college-savings plans since their kids were in diapers. But even if you procrastinated and your child is already enrolled in school, contributing to a 529 account could save you hundreds a year.

The tax perks vary from state to state. Twenty-six states and the District of Columbia offer a state income-tax deduction for contributions to 529 plans that they sponsor (see our map for all the states that offer tax breaks). Five states -- Arizona, Kansas, Maine, Missouri and Pennsylvania -- offer a state-tax deduction for contributions to any 529 plan. Indiana, Vermont and Utah offer a state-tax credit for contributions to their state-sponsored plans. (A tax credit is more valuable than a deduction because it reduces your taxes dollar for dollar.) In addition to the state-tax benefits, earnings on your plan investments are tax-free if they are used to pay qualified expenses, such as tuition, books and fees.

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Contributing Editor, Kiplinger's Personal Finance