My girlfriend asked me help pick a 529 plan for nephew and niece. While I was already familiar with 529 plans, I had never done a whole lot of research into them. The basics of my 529 knowledge consisted of:

  • Contributions to 529 plan grow tax free as long as the money spent in on higher education spending
  • Some states make contributions to in state 529 plan tax deductible (for state tax purposes)
  • Each state have different plans and different plan administrators

Beyond those three facts, I didn’t and still don’t know too much about 529 plans. That’s probably because I don’t have children, nephews, or nieces that I would want to open plan for. However I did some quick research a learned that Utah, Michigan, and Ohiohave good plans and low cost fund selections.

For my girlfriend it makes sense for her to open an account with any of the above. Massachusetts does not offer and state tax deduction for contributions made to a in-state 529 plan. However since my girlfriend was looking to combine with the other aunt (her other sister) to open two different accounts, one for the nephew and one for the niece, it actually made sense to open one account in Virginia. The other aunt lives in Virginia which makes 529 contributions tax deductible. Even though the beneficiary of the 529 is out of state, the deductibility of the contribution is only determined by the residency of the contributor. Well at least according to what I read in the Oregon 529 FAQ.