Does Texas offer a 529 plan tax deduction?

No. Texas has no state income tax, so there is no state income tax deduction or credit for 529 plan contributions. There is simply no state tax to deduct against, unlike states such as New York that offer a deduction.

What is the tax benefit of a Texas 529 plan then?

The benefit is entirely federal. Money in a 529 plan grows tax-deferred, and withdrawals used for qualified education expenses are completely free of federal income tax on the earnings. Over many years this tax-free growth can be substantial.

What are the Texas 529 plans called?

Texas sponsors the Texas College Savings Plan (a direct-sold 529) and the LoneStar 529 Plan (advisor-sold). Texas also runs the Texas Tuition Promise Fund, a prepaid plan. All offer the same federal tax-free growth on qualified withdrawals.

How is the federal tax savings estimated?

The calculator projects your account's growth using compound interest, then compares the earnings to what you would owe in a taxable account at the tax rate you enter. Because 529 earnings used for qualified expenses are federally tax-free, that difference is your estimated tax savings.

Can I use a 529 from another state for a Texas student?

Yes. You can invest in any state's 529 plan regardless of where you live or where the student attends school. Since Texas offers no state deduction, Texas residents are free to shop for the plan with the lowest fees and best investment options nationwide.

Texas 529 Plan Tax Benefit Calculator

Email me this result

Get this tool's output sent to your inbox, plus one useful tool a week. No spam, unsubscribe any time.

Why Texas 529 savers focus on federal benefits

Many states reward 529 contributions with a state income tax deduction or credit. Texas does not — and the reason is simple: Texas has no state income tax at all, so there is nothing to deduct against. That doesn’t make a Texas 529 plan worthless, though. The real prize is federal: your investments grow tax-deferred, and withdrawals for qualified education expenses come out completely free of federal tax on the earnings.

This tool confirms the $0 state deduction and then projects how much your account grows and how much federal tax that tax-free growth saves you.

How it works

The projection uses standard compound-growth math:

The initial lump sum grows monthly: FV = principal × (1 + r/12)^months.
Monthly contributions grow as an annuity: FV = payment × ((1 + r/12)^months − 1) / (r/12).
Earnings are the projected value minus everything you contributed.
The estimated federal tax saved is your earnings × the tax rate you’d otherwise pay on investment gains — savings you keep because qualified 529 withdrawals are federally tax-free.

Tips and notes

Because Texas gives no state deduction, you are free to pick any state’s 529 plan — shop for the lowest fees nationwide.
The “tax rate on gains” field should reflect what you’d otherwise pay on long-term capital gains or dividends (commonly 0%, 15%, or 20% federally).
Returns are assumptions, not guarantees, and withdrawals must be for qualified education expenses to stay tax-free. This is an estimate, not investment or tax advice.