Delaware is one of the states that offers no state income tax deduction or credit for contributions to a 529 college savings plan, including its own DE529 Education Savings Plan. This calculator confirms that your Delaware state tax saving on contributions is $0, and then estimates the real benefit a Delaware family gets from a 529: federal tax-free growth and tax-free qualified withdrawals.
How it works
Because Delaware grants no deduction, the value of a 529 here is the tax you avoid on investment earnings. The calculator projects the account using standard compound growth:
Future balance = (Start + Contributions) compounded at the annual return Earnings = Future balance − total contributed Federal tax avoided = Earnings × your capital-gains tax rate
Contributions are made with after-tax dollars, so only the earnings portion would have been taxable in a regular brokerage account. In a 529, those earnings are never taxed when used for qualified education expenses, which is the dollar benefit shown.
Delaware 529 rules explained
- Delaware has no state 529 deduction — contributions do not reduce your Delaware taxable income.
- The DE529 Education Savings Plan is managed with Fidelity and offers low-cost index portfolios.
- Because there is no home-state benefit, Delaware families can freely choose any state’s plan.
- The federal benefits still apply: tax-deferred growth and tax-free qualified withdrawals.
Worked example
A family starts with $5,000, adds $3,000 per year for 15 years at a 6% annual return:
- Total contributed = $5,000 + ($3,000 × 15) = $50,000
- Projected balance ≈ $78,000 (illustrative)
- Earnings ≈ $78,000 − $50,000 = $28,000
- At a 15% capital-gains rate, federal tax avoided ≈ $28,000 × 15% = $4,200
Note: This estimates federal tax-free growth only. Delaware provides no state deduction, so the state tax line is always $0. Returns are assumptions, not guarantees. Verify plan details at de529.com and federal 529 rules at irs.gov.