States have long offered tax breaks to parents who contribute to 529 college-savings plans. Now, they’re increasingly offering an even more straightforward incentive: cash. Fifteen states offer matching contributions, seed money, or other forms of financing to encourage residents to sign up.
Money stashed in a 529 account grows tax-free, and withdrawals are tax-free as long as the funds are used for qualified educational expenses. While you can invest in any state’s plan, many states provide a tax break for residents.
The new financial incentives could also make investing in your own state’s plan more appealing, although the most generous grants are income-based. Colorado’s CollegeInvest 529 plan will match contributions up to $500 a year for five years as long as the beneficiary is 8 years old or younger when parents sign up and the family’s adjusted gross income is 400% or less of the federal poverty level ($106,000 for a family of four). Other states have no income restrictions, but their offerings are smaller—$50 or $100 for parents of newborns.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Although these incentives may encourage more families to opt for a 529 plan, investors should still shop around, with a focus on plans with low fees and solid investment options, says Emory Zink, an associate director at research firm Morningstar. To find Morningstar’s top-rated plans, go to www.morningstar.com/articles/1006084/the-top-529-college-savings-plans-of-2020.
-
Stocks Slip to Start Fed Week: Stock Market TodayWhile a rate cut is widely expected this week, uncertainty is building around the Fed's future plans for monetary policy.
-
December Fed Meeting: Live Updates and CommentaryThe December Fed meeting is one of the last key economic events of 2025, with Wall Street closely watching what Chair Powell & Co. will do about interest rates.
-
This Is Why Investors Shouldn't Romanticize BitcoinInvestors should treat bitcoin as the high-risk asset it is. A look at the data indicates a small portfolio allocation for most investors would be the safest.
-
New Ways to Use 529 PlansTax-free withdrawals from 529 plans could help you sharpen your job skills.
-
I Want to Help Pay for My Grandkids' College. Should I Make a Lump-Sum 529 Plan Contribution or Spread Funds out Through the Years?We asked a college savings professional and a financial planning expert for their advice.
-
Money for Your Kids? Three Ways Trump's ‘Big Beautiful Bill’ Impacts Your Child's FinancesTax Tips The Trump tax bill could help your child with future education and homebuying costs. Here’s how.
-
Amazon Resale: Where Amazon Prime Returns Become Your Online BargainsFeature Amazon Resale products may have some imperfections, but that often leads to wildly discounted prices.
-
How Intrafamily Loans Can Bridge the Education Funding GapTo avoid triggering federal gift taxes, a family member can lend a student money for education at IRS-set interest rates. Here's what to keep in mind.
-
How an Irrevocable Trust Could Pay for EducationAn education trust can be set up for one person or multiple people, and the trust maker decides how the money should be used and at what age.
-
UTMA: A Flexible Alternative for Education Expenses and MoreThis custodial account can be used to pay for anything once the beneficiary is considered an adult in their state. There are some considerations, though.
-
Best 529 Plans of 2025Check out the best 529 plans of 2025 and find the best plan for your child or grandchild’s college savings.
