529 Plans for High Earners: Best Out-of-State Options When You Get No Deduction

Here’s the uncomfortable truth: if you’re reading this site, your state’s 529 tax deduction probably isn’t available to you.

New Jersey phases out its $10,000 deduction above $200,000 AGI. California offers no deduction at all. And even in states with generous deductions, the benefit often represents a tiny fraction of your contributions when you’re saving seriously for college.

This is actually liberating. Without a state tax benefit anchoring you to a mediocre home-state plan, you’re free to choose the best 529 plan in the country based purely on what matters: low fees, excellent investment options, and flexibility.

Let’s find the right one.

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Quick Reference: Top 529 Plans for Out-of-State Contributors

If you want the short answer, here it is:

Plan	Expense Ratio	Minimum	Investment Manager	Best For
Utah my529	0.10-0.19%	$0	Vanguard	Overall best choice
Nevada Vanguard 529	0.13-0.16%	$3,000	Vanguard	Vanguard purists
New York 529 Direct	0.12-0.17%	$0	Vanguard	Low minimums, NY residents
California ScholarShare	0.08-0.45%	$0	TIAA	Lowest passive options
Illinois Bright Start	0.11-0.38%	$0	Vanguard index available	IL residents

The winner for most high earners: Utah my529. Lowest overall costs, Vanguard index funds, highly customizable portfolios, no minimum investment, and Morningstar Gold rating.

Use our 529 Plan Comparison Calculator to see exactly how these plans compare for your specific situation.

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Why High Earners Should Ignore Their State’s Plan

Most 529 advice starts with “check your state’s tax deduction.” That advice doesn’t apply to you.

States Where High Earners Get No Benefit

No deduction at all:

• California, Delaware, Hawaii, Kentucky, Maine, New Jersey (above $200K), North Carolina, Tennessee (no state income tax)
• Seven states with no income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming

Phase-outs that hit high earners:

• New Jersey: $10,000 deduction phases out $200K-$250K AGI
• Several other states have income limits or reduced benefits above certain thresholds

Minimal benefit states:

• Some states cap deductions so low (e.g., $2,000-$4,000) that the tax benefit is negligible compared to fee savings from choosing a better plan

The Math on State Deductions vs. Fees

Let’s compare: you live in a state offering a $5,000 deduction at a 6% state tax rate. That’s $300/year in tax savings.

But your state’s plan charges 0.50% annually, while Utah my529 charges 0.12%.

On a $100,000 balance, that’s:

• State plan fees: $500/year
• Utah my529 fees: $120/year
• Fee savings from Utah: $380/year

The fee savings exceed the tax deduction—and compound over 18 years. On a moderately-funded 529 ($200K+ balance), choosing a low-fee plan over a high-fee state plan can save you $15,000-$25,000 by the time your child starts college.

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What Actually Matters When Evaluating 529 Plans

Forget state benefits. Here’s what you should actually evaluate:

1. Expense Ratios (Most Important)

The expense ratio is the annual fee charged as a percentage of assets. It’s the single biggest factor in long-term performance.

• Excellent: Under 0.15%
• Good: 0.15-0.25%
• Acceptable: 0.25-0.40%
• Avoid: Over 0.50%

Advisor-sold plans often charge 0.80-1.20% or more. Over 18 years, this can cost you $20,000+ compared to a direct-sold plan. Never use an advisor-sold 529 unless you’re receiving substantial financial planning value in return.

2. Investment Options

Look for:

• Index fund options (Vanguard, Fidelity, or Schwab)
• Age-based portfolios that automatically adjust allocation as your child ages
• Flexibility to customize or choose static allocations if desired

Avoid plans that only offer actively managed funds or proprietary investments with high fees.

3. Minimum Investment Requirements

• Utah my529: $0
• Nevada Vanguard: $3,000
• Most direct-sold plans: $0-$500

If you’re superfunding ($95K-$190K), minimums are irrelevant. But for ongoing contributions, $0 minimums provide maximum flexibility.

4. Plan Management and Features

• Online account management (all major plans offer this now)
• Automatic investment options
• Gifting features for grandparents and family members
• Mobile app (nice to have, not essential)

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Top 5 Plans for Out-of-State Contributors: Deep Dive

1. Utah my529 — Best Overall

Expense ratios: 0.10-0.19% Minimum: $0 Investment manager: Vanguard

Utah my529 consistently ranks as the top 529 plan in the country. Why:

• Lowest overall costs among major plans
• Vanguard index funds across all portfolios
• Highly customizable — build your own allocation or use age-based
• No minimum investment — start with any amount
• Morningstar Gold rating for years running

The only “downside” is that Utah offers no state tax benefit to non-residents—but as a high earner, you likely don’t qualify for your own state’s benefit anyway.

Bottom line: Unless you have a specific reason to choose otherwise, Utah my529 should be your default choice.

2. Nevada Vanguard 529 — For Vanguard Loyalists

Expense ratios: 0.13-0.16% Minimum: $3,000 Investment manager: Vanguard

Nevada’s Vanguard-managed plan is nearly as good as Utah’s, with slightly different portfolio options. The $3,000 minimum is the main drawback for smaller investors, but irrelevant if you’re superfunding.

Choose Nevada if: You want the Vanguard name on your statements and don’t mind the minimum.

3. New York 529 Direct Plan — No Minimum, Vanguard Funds

Expense ratios: 0.12-0.17% Minimum: $0 Investment manager: Vanguard

New York’s direct plan offers Vanguard index funds with no minimum investment. NY residents also get a state deduction ($5K single, $10K married) with no income limit—making this the rare case where a state plan might be optimal even for high earners.

Choose New York if: You’re a NY resident (for the deduction) or want Vanguard funds with no minimum.

4. California ScholarShare 529 — Lowest Minimum Fees

Expense ratios: 0.08-0.45% Minimum: $0 Investment manager: TIAA

California’s plan has the lowest expense ratio on its passive index options (0.08%), but ranges up to 0.45% for active funds. Stick to the passive options.

California offers no state income tax deduction for 529 contributions, so CA residents have no reason to prefer this plan over Utah—unless you specifically want TIAA management.

Choose California if: You want the absolute lowest fees and will select passive index options.

5. Illinois Bright Start — Solid Mid-Tier

Expense ratios: 0.11-0.38% Minimum: $0 Investment manager: Union Bank & Trust (Vanguard index options available)

Illinois offers a generous state deduction ($10K single, $20K married) with no income limit, making it attractive for IL residents. The plan includes Vanguard index options at competitive fees.

Choose Illinois if: You’re an IL resident and want the state deduction plus solid investment options.

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529 Superfunding Strategy

The superfunding strategy is one of the most powerful wealth transfer techniques available to high earners.

How It Works

The IRS allows a special election for 529 contributions: you can contribute up to 5 years of annual gift tax exclusions in a single year.

2026 numbers:

• Annual gift exclusion: $19,000 per recipient
• 5-year superfunding (individual): $95,000
• 5-year superfunding (married couple, gift-splitting): $190,000

Gift Tax Implications

Superfunding requires filing IRS Form 709 (gift tax return), but doesn’t actually incur gift tax unless you exceed your lifetime exemption ($13.61 million in 2026).

Key rules:

• You elect on Form 709 to spread the gift over 5 years
• No additional gifts to that beneficiary for the 5-year period (or you’ll exceed the annual exclusion)
• If you die within 5 years, a prorated portion is included in your estate
• Both spouses can superfund to the same beneficiary (combining for $190K)

Superfunding Strategy Example

The Chen Family:

• Combined income: $500,000
• Newborn daughter, Emily
• Want to maximize education funding

Strategy:

• Both parents superfund Emily’s 529: $95,000 × 2 = $190,000
• Choose Utah my529 for lowest fees
• Select aggressive age-based portfolio (18 years to grow)

Projected result at age 18:

• Initial contribution: $190,000
• No additional contributions needed
• At 7% annual return: ~$640,000
• Total fees (0.12% average): ~$8,000
• Net balance: ~$632,000 — enough for 4 years at almost any school

When Superfunding Makes Sense

Superfunding is ideal when:

• You have a large cash position or liquidity event (bonus, stock vesting, business sale)
• You want to maximize estate tax exclusions
• Your child is young (maximizing compound growth time)
• You’re confident about educational expenses
• You want a “set and forget” education funding solution

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SECURE 2.0 Game Changer: 529-to-Roth IRA Rollover

The SECURE 2.0 Act introduced a provision that makes 529 overfunding far less risky.

How the Rollover Works

Starting in 2024, unused 529 funds can be rolled into a Roth IRA for the beneficiary. This is extraordinary because it bypasses Roth IRA income limits.

Your child earning $500,000 as a software engineer? They can still receive 529-to-Roth rollovers even though they couldn’t contribute directly.

Requirements and Limits

Requirement	Details
529 account age	Must be open 15+ years
Contribution timing	Only contributions older than 5 years (and their earnings) qualify
Annual limit	Roth IRA contribution limit ($7,500 in 2026)
Lifetime limit	$35,000 per beneficiary
Earned income	Beneficiary must have earned income in the rollover year
Beneficiary	Rollover must be to the 529 beneficiary’s Roth IRA

Strategic Implications

For parents of newborns:

Open a 529 immediately—even with a small amount. The 15-year clock starts now. By age 15, your child could begin rolling unused funds into their Roth IRA, building tax-free retirement savings before they even start working.

For parents who over-saved:

If your child receives scholarships, attends a less expensive school, or chooses a non-college path, you now have a valuable exit strategy. Instead of paying the 10% penalty on non-qualified withdrawals, roll up to $35,000 into their Roth.

For estate planning:

The 529-to-Roth rollover extends the value of your gift across generations. You fund education, and any excess converts to tax-free retirement growth for your child.

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State-Specific Gotchas

States with Recapture Rules

Some states “recapture” (claw back) previous 529 deductions if you roll funds out of state or make non-qualified withdrawals. Check before rolling:

• Indiana: Recaptures if rolled out within 12 months
• Wisconsin: Recaptures deduction on rollovers to other states
• Several others: Various recapture provisions

If you’ve been claiming state deductions, consult your state’s rules before rolling to another plan.

States with No Income Tax

If you live in a state with no income tax (Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming), you have zero incentive to use your state’s plan. Choose purely on fees and investment options—Utah my529 is almost always the answer.

States with No 529 Deduction

California, Delaware, Hawaii, Kentucky, Maine, and North Carolina don’t offer 529 deductions. Like no-income-tax states, choose based on plan quality alone.

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Case Study: NJ Tech Couple with Newborn

Profile

• Situation: Software engineer ($280K) and product manager ($180K) in New Jersey
• AGI: $460,000
• Newborn daughter: Emma
• 529 state deduction: None (income far exceeds NJ’s $200K phase-out)
• Goal: Fully fund Emma’s college education

Strategy

Step 1: Choose Utah my529

With no NJ deduction available, they choose based purely on fees and quality. Utah my529 wins.

Step 2: Superfund at birth

Both parents contribute $95,000 each, totaling $190,000. They elect 5-year gift-splitting on Form 709.

Step 3: Select age-based aggressive portfolio

With 18 years to grow, they choose Utah’s most aggressive age-based option, which will automatically shift conservative as Emma approaches college.

Step 4: Set and forget

No additional contributions needed. They’ll review annually but make no changes unless life circumstances shift.

Projected Outcome

Year	Balance (7% return)	Notes
0	$190,000	Initial superfund contribution
5	$266,500	5-year gift period ends
10	$373,900	Halfway point
15	$524,500	529-to-Roth eligible
18	$640,000	Emma starts college

With $640,000 and total fees under $8,000, Emma’s education is fully funded for almost any school in the country.

If Emma gets a full scholarship:

They can change the beneficiary to a future sibling, roll $35,000 into Emma’s Roth IRA over several years, or use funds for graduate school.

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Case Study: CA Physician with Three Children

Profile

• Situation: Dual-physician family in California
• Combined income: $650,000
• Children: Ages 2, 5, and 8
• 529 state deduction: None (CA offers no deduction)
• Goal: Fund undergraduate education for all three, plan for Roth rollover flexibility

Strategy

Step 1: Open Utah my529 accounts for all three children

Three separate accounts, each beneficiary clearly designated.

Step 2: Superfund for the youngest, contribute steadily for older two

• Child 1 (age 2): Superfund $190,000 (16 years to grow)
• Child 2 (age 5): Superfund $95,000 + $1,000/month ongoing
• Child 3 (age 8): $2,000/month ongoing (catch up on shorter timeline)

Step 3: Use moderate age-based portfolios

With varying timelines, each child’s account uses age-appropriate allocations.

Step 4: Plan for 529-to-Roth flexibility

All accounts opened now will hit the 15-year mark before or during college, enabling Roth rollovers if funds remain.

Projected Outcomes

Child	Current Age	Years to College	Strategy	Projected Balance at 18
Child 1	2	16	$190K superfund	~$550,000
Child 2	5	13	$95K superfund + $1K/mo	~$380,000
Child 3	8	10	$2K/mo	~$320,000

Total education funding: ~$1,250,000 across three children

SECURE 2.0 flexibility: If any child receives scholarships or needs less, up to $35,000 per child can roll into their Roth IRA, providing ~$105,000 in potential tax-free retirement savings across the family.

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Action Steps

This Week

1. Check your state’s 529 deduction rules — confirm whether you qualify based on your income
2. If no state benefit applies, open a Utah my529 account (takes 15 minutes online)
3. Consider superfunding if you have the liquidity and want to maximize early growth

This Month

1. Set up automatic contributions — even $500/month adds up significantly
2. Choose your investment approach — age-based is the right answer for most parents
3. Add beneficiaries’ Social Security numbers — required for account setup

Annually

1. Review account balance and allocation — ensure age-based is shifting appropriately
2. Consider additional contributions — especially if income increases
3. Check for rule changes — 529 and Roth rules evolve over time

Before College Starts

1. Understand qualified expense rules — know what you can and can’t pay for
2. Plan withdrawal timing — match withdrawals to expense dates within the same tax year
3. Keep records — save receipts for all education expenses

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The Bottom Line

High earners who don’t qualify for state 529 deductions have a hidden advantage: complete freedom to choose the best plan in the country.

For most high-earning families, the answer is Utah my529. Lowest fees, Vanguard index funds, no minimums, and maximum flexibility.

Superfund if you can. Choose age-based portfolios. Let compound growth do the heavy lifting. And rest easy knowing SECURE 2.0 gives you a tax-advantaged exit strategy if plans change.

Your child’s education fund deserves the same optimization you apply to the rest of your financial life. Now go open that account.

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Ready to see exact numbers for your situation? Use our 529 Plan Comparison Calculator to compare projected balances, fees, and outcomes across the top plans.