Tax Savings Are at Your Fingertips With a 529 Plan
With tax season in full swing, many Americans are planning to take advantage of every deduction and exemption available. A 529 plan with The Education Plan® can help you save on your taxes and help you save for future education at the same time. Let us walk you through the tax savings and benefits.
An Opportunity for a Range of Tax Savings
A 529 plan is a tax-advantaged education savings plan that can be used to pay for a wide range of qualified education expenses for your child or loved one, including tuition, room and board, books, computers, and more. Money invested in a 529 plan can be used at any accredited college or university, trade, or professional school. Funds can also be used to pay for K–12 tuition, apprenticeship programs, and student loan repayment.
Apart from being a flexible savings account that helps you save for a loved one’s future education; a 529 plan offers a wide range of tax benefits including:
- Tax-advantaged growth: Earnings on a 529 account are not subject to federal taxes when used for qualified education expenses. This means that you will pay no federal income tax on earnings as your account grows over the years.
- State tax incentives: Many states offer additional tax benefits, either in terms of a tax deduction or a credit for contributions into a 529 account. In New Mexico, any contribution to your 529 account with The Education Plan is eligible for deduction from your New Mexico state taxable income each year.
- Gift tax benefits: A contribution to a 529 plan is considered a completed gift from the contributor to the beneficiary for gift tax purposes. In 2025, the first $19,000 ($38,000 for a married couple filing jointly) given to each beneficiary (annual basis) is excluded from federal gift taxes. A special provision in the IRS code allows for five-year accelerated gifting to a 529 plan. This means you can contribute up to $95,000 for a single contributor (or $190,000 for married couples) in 2024 and apply it against the annual gift tax exclusion equally over a five-year period. This can be a beneficial estate planning tool. We recommend consulting with a tax advisor about gift taxes and your specific situation before investing.
- Tax-free withdrawals: Withdrawals from a 529 account are tax free as long as they are used for qualified education expenses.
Your Tax Refund: Multiply the Savings
For the 2024 tax year, the IRS estimated that the average refund was $3,138. Many families see a sizeable tax refund as an opportunity to make a single large purchase or fund a vacation. This year, instead of spending your refund, consider investing it in a 529 education savings account with The Education Plan. The benefits can pay off for years to come.
- Boost your savings with a lump-sum payment.
- If you’re a New Mexico taxpayer, the amount you contributed in 2025 is deductible on your state income tax return for that year, multiplying your savings.
- Earnings on your contribution will be tax-free, and withdrawals will be tax free as long as they are used for qualified education expenses.
It’s Never Too Late to Get Started
When you save for future education with a 529 account with The Education Plan, it not only helps you prepare for future education expenses, but also offers significant tax benefits. Ready to get started? You can open an account in about 15 minutes with no initial minimum contribution required.
Frequently Asked Questions
A 529 plan is a tax-advantaged investment account that is designed to grow savings for future education expenses for a specified beneficiary. 529 plans offer unique benefits and features that make them an appealing strategy for education related saving.
A 529 plan can be used for “qualified educational expenses.” For federal tax purposes, qualified educational expenses include:
- Tuition and fees at accredited higher education institutions
- Books
- Supplies and equipment
- Room and board for beneficiaries attending on at least a half-time basis.
- Computer technology, equipment, and internet access
- Up to $10,000 a year for K-12 tuition and expenses (Limit increase to $20,000 in 2026)
- Expenses for educational special needs services
- Transfers to an ABLE account for the beneficiary (transfer subject to annual limit)
- Apprenticeship expenses
- Up to $10,000 for student loan repayment
- Credentialing expenses and certification programs
- Roth IRA rollover for the beneficiary
If you're not sure if an expense is considered "qualified," we recommend consulting with a tax professional or advisor. Unqualified expenses will be treated like ordinary income: state and federal taxes will apply, with a 10% federal penalty for withdrawals from your 529 plan used to pay for them.
New Mexico residents can deduct contributions to The Education Plan from their state taxable income each year. This includes contributions made to an account that you are not the account owner of.
You cannot deduct contributions from federal income taxes.
Any person at least 18 years old with a valid Social Security Number (SSN) or Tax Identification Number (TIN) can open a 529 account. The account holder chooses the investment options, designates a beneficiary, and requests the distribution of funds.
The cost of college continues to rise, including tuition, housing, food and supplies, so it’s important to begin saving as soon as possible. You can learn more about how much a typical college education costs on our Cost of College page. It’s never too early or too late to start.
The Education Plan offers a variety of investment options to fit you and your family’s needs, risk tolerance and goals. You can see all of the available investment portfolios on the investments page.
Yes, you can use up to $20,000* a year to cover tuition and expenses for K-12 education.
Qualified K-12 expenses include:
- Tuition (public, private, and religious)
- Curriculum materials, books (including digital/online) and instructional materials
- Tutoring and instructional classes**
- Fees for a nationally standardized norm-referenced achievement test, an advanced placement examination, or any examinations related to college or university admission
- Dual enrollment program fees
Educational therapies for students with disabilities provided by a licensed or accredited practitioner or provider, including occupational, behavioral, physical, and speech-language therapies
*Starting in tax year 2026. The annual limit is $10,000 in tax year 2025 and permitted for tuition only.
**Tuition for tutoring or educational classes outside of the home, including at a tutoring facility, but only if the tutor or instructor is not related to the student and—
(i) is licensed as a teacher in any State,
(ii) has taught at an eligible educational institution,
or (iii) is a subject matter expert in the relevant subject.
You can open an account with The Education Plan online or by mailing in the enrollment form. In order to open an account, you will need the following information:
- Your social security number or TIN
- Your address
- Your bank account information (in order to fund the account)
- The beneficiary’s social security number or TIN
- The beneficiary’s birthday
-The beneficiary’s address
