If you're searching for ways to start saving for your child's future education or think there might be better alternatives to what you're doing now, consider opening a tax-advantaged 529 education savings account today. There are many 529 savings plans out there, and finding the right one for you can feel daunting. Here's your guide to finding the right plan (or plans) for your family, whether you stick close to home or cross state lines for what might fit best with your situation.

Most states offer a 529 education savings plan, such as The Education Plan®,  which is sponsored by the State of New Mexico. These plans empower parents to invest in their children's future education, offering flexibility and control. They can be opened anytime, with almost anyone (including you) as the beneficiary. Additionally, almost anyone can contribute to a 529 plan, which makes it easier for extended family and friends to invest in your loved one’s future education. The funds can be used for a wide range of educational expenses, from college to vocational education, post-graduate work, medical school, law school, and even K-12 tuition, apprenticeship expenses, and student loan repayment.
 

The majority of 529 plans are available to both in-state residents and out-of-state residents. You can choose to invest in another state's 529 plan or invest in multiple states’ plans simultaneously. The federal tax benefits that come with investing in a 529 plan, including tax-free growth and tax-free withdrawals when the funds are used for qualified expenses, remain the same across 529 plans. 

Many states offer additional state tax benefits for investing in a 529 plan. In New Mexico, for example, contributions to a New Mexico-sponsored 529 plan, like The Education Plan, are eligible for deduction from your New Mexico state taxable income each year. New Mexico is one of only a few states in the nation to provide a state tax deduction for contributions to its 529 plan that is not limited or capped. 

You should consider the tax benefits your state offers before deciding to invest in any plan. You should also consider any potential tax consequences associated with each specific state’s laws.  For example, some states do not allow 529 funds to be used for K-12 tuition, and there may be state tax consequences if you use the funds for this purpose.

Also, make sure you compare 529 plan fees and costs when considering the best plan for you and your child. Program management fees, account maintenance fees, and underlying investment fees are all fees you should consider and evaluate.

Additionally, you should consider which 529 plan has investment options that best meet your needs, situation and risk tolerance. 529 plans generally offer a range of mutual funds and index funds, and each plan has different underlying investment fees and performance. The Education Plan offers investment options that include year of enrollment portfolios and stand-alone options. 
 

Some states offer state tax deductions or credit for contributions to any 529 plan. These are called tax parity states. They currently include: 

• Montana
• Arizona 
• Kansas
• Missouri 
• Arkansas 
• Ohio 
• Pennsylvania  
• Maine 
   

Some states do not offer tax deductions or credit for 529 contributions. These states are called tax-neutral states. The current list includes: 

• Washington
• California 
• Nevada 
• Wyoming 
• South Dakota 
• Texas 
• Kentucky 
• Tennessee 
• North Carolina 
• Florida 
• New Hampshire 
• Alaska 
• Hawaii

A great place to start your research is with this state-by-state map, which shows the most recent tax benefits, or lack thereof, each state offers. 
 

It’s never too early or too late to start saving for future education. Account setup is easy and takes about 15 minutes online. You can get started by opening a 529 account with The Education Plan today.