I want to contribute to a 529 account for my 4-month-old
granddaughter. Can I get a tax deduction, or is that just for the
Yes, grandparents can claim the deduction for contributing to a
529 if they live in one of the 34 states that offer a state income
tax deduction for 529 college-savings plan contributions. The only
question is whether you must own the account or whether you can
contribute to one set up by, say, the child's parents.
About two-thirds of the states that offer a state income tax
deduction for 529 college-savings plan contributions let anyone who
is a resident of that state take a deduction, even if you don't own
the account -- whether you're a parent, relative or friend. The
remaining states let you deduct contributions only if you're the
account owner. In that case, you might want to open an account for
your granddaughter so that you can qualify for the deduction, even
if her parents already have an account for her. There's no limit to
the number of 529 accounts that can be opened for one beneficiary.
(To check up on your state's rules, see
In Utah and Virginia, the owner of a 529 account can also deduct
the contributions other people make to the account. For example, in
Virginia, account owners can deduct up to $4,000 in contributions
per account each year, with unlimited carryover of excess
contributions, no matter who makes the contributions. And if you're
70 or older, you can deduct the entire amount contributed to the
Virginia 529 you own in one year.
Most of the 34 states that offer the tax break let you take a
deduction only if you contribute to your own state's 529. However,
five states -- Arizona, Kansas, Maine, Missouri and Pennsylvania --
give you the break for contributing to any state's account.
Be careful with withdrawals from a 529 for your granddaughter
when she is in college, because they are counted as income in the
financial aid calculations. See
Limit the Impact of Grandparent-Owned 529 Plans on
For more information, see
529 Plan FAQs.