Opening a 529 account is a great way to save for your child’s future college education. And in some states, you can receive matching funds that make it even easier to reach your goals.
The exact form of matching varies from state to state. But all are intended to encourage more parents to open a 529 account, which is a tax-advantaged way for parents to save and invest for education-related expenses — including tuition, room and board, and supplies and books.
It’s not just college expenses anymore, though. Parents also can use a 529 account to save for K-12 tuition, thanks to a change included in the Tax Cuts and Jobs Act of 2017.
Recently, CNBC rounded up a list of states that offer some type of incentive for those who open 529 accounts. So, if you live in any of the following states, it might be worth digging a little deeper to find out whether incentives are available to you:
- North Dakota
- Rhode Island
- West Virginia
New York City also offers an incentive.
Some of these incentive programs offer matching grants after you open an account. For example, in Rhode Island, CollegeBoundbaby offers a $100 grant to babies born or adopted in the state between Jan. 1, 2015, and June 30, 2021.
Other programs match your contributions dollar for dollar up to a certain amount. For example, in Colorado, the CollegeInvest Matching Grant Program gives eligible account owners up to $1,000 in matching funds annually for up to five years when they open and contribute to a CollegeInvest 529 College Savings Account.
Meanwhile, the Tennessee Investments Preparing Scholars (TIPS) program offers $100 for every $25 you contribute each year, with a lifetime maximum match of $1,500.
Just be aware that many of these programs have rules you need to follow to qualify for the incentives.
For example, the Colorado program is only available if a child is 8 years old or younger when you first apply. In Tennessee, children must be 14 or younger. In Rhode Island, you must opt in to the CollegeBoundbaby program within one year of a child’s birth or adoption.
Some programs, including those of Colorado and Tennessee, also have income requirements.
For a state-by-state breakdown of what is offered, check out the CNBC story.
And for more tips about financing college, check out “Should We Save for Retirement or Our Kids’ College?“