Texas 529 Plan Rules And College Savings Options
Texas has a 529 plan called Texas College Savings Plan that can help you save for college. Texas also has a 529 Able Plan as well.
If you live in Texas, these might be good options for you to save for college.
These programs are designed to help make college more affordable - so that you can get the education you need. By saving for college early on, you can make paying for college easier down the road.
If you're not quite sure how 529 plans work, check out this starter guide to What Is a 529 Plan?
There is also a specific order of operations to save for college that we recommend families follow. These programs are specific to the State of Texas. Each state has different rules when it comes to 529 plan savings. Here are the Texas 529 plan rules.
Average Cost Of College In Texas
When saving for college in Texas, it's important to take into consideration the cost of attendance in the state. If you choose to go to an out-of-state school, you need to look at the average cost of attendance in that state.
There are 407 colleges and universities in the State of Texas.
The total average cost of college (Cost of Attendance) in Texas for in-state residents is $17,095 for 2023. This includes tuition, room and board, books and supplies, and other expenses.
For just tuition alone, the average undergraduate tuition for in-state residents is $6,624 for 2023. The cost of tuition in Texas has been rising roughly 5% per year.
See how this compares to the average cost of college here. Keep in mind the average student loan debt by graduating class here.
Explore the data here.
Texas 529 Plan Rules And Tax Information
Tax savings is one of the big benefits of using a 529 plan to save for college. On a federal-level, there is no tax savings for contributions, but qualified distributions are tax-free.
Here are the special tax benefits and considerations for using a 529 plan in Texas.
Contributions
Texas does not have a personal income tax, and as such, there are no tax benefits for contributions.
Minimum: $25
Maximum: Accepts contributions until all account balances for the same beneficiary reach $500,000.
Rollovers
Rollovers into the state plan are allowed.
Qualified Distributions
Qualified distributions from a Texas and non-Texas 529 plan are tax-free.
K-12 Education
Texas does conform with Federal law in regard to using a 529 plan for K-12 tuition. See this guide: Using a 529 Plan For Elementary and High School Private Education.
Student Loans
Texas does conform with Federal law for using a 529 plan for student loans.
Rollover To Roth IRA
Texas does allow the rollover to a Roth IRA up to $35,000. Learn more about the 529 plan to Roth IRA rollover here.
Non-Qualified Distributions Taxes, Penalties, Recapture
A non-qualified withdrawal from a Texas 529 plan follows federal law since there is no state personal income tax.
Texas 529 College Savings Plan Options
Texas has several 529 plan options - one consumer plan and one plan that is sold by financial advisors (we're big advocates of doing-it-yourself, you don't need to pay a financial advisor for this). They also have a pre-paid tuition program.
Texas College Savings Plan
The Texas College Savings Plan is the name of Texas' 529 Plan. This plan offers a variety of investment options, including age-based portfolios that become more conservative as the child approaches college, and static investment fund options.
The funds offered include Vanguard,T. Rowe Price, and TIAA.
Fees:
There is a program management fee of 0.25%, plus a state fee of 0.06%.
The underlying funds all charge expense ratios from 0.00% to 0.02115% depending on the investment option.
Who Should Use It:
We don't recommend the Texas College Savings Plan due to high fees and no tax deduction for using it.
We recommend that out-of-state residents utilize other plans.
Texas Tuition Promise Fund
The Texas Tuition Promise Fund is a prepaid tuition plan where you can purchase units of future education at Texas public colleges and universities.
This plan is only open to Texas residents.
The program has offered units at 2 year public colleges and 4 year universities. The value of a unit is the same as a unit today - so you can hedge the future cost of increases.
Texas 529 Able Plan Options
529A Able accounts are accounts designed to help those with disabilities escape poverty and save for themselves. Learn more about 529A Able Plans here.
Texas Able
The Texas Able is a 529A plan open to all residents in Texas.
This plan allows contributions of up to $18,000 per year from all sources.
It does have a minimum initial contribution amount of $50 per account. The minimum subsequent contribution amount is $25.
The plan does have an account maintenance fee of $48 annually, assessed at $4 per month. It also has a program management fee of 0.25%.
You can open a Texas Able Plan here.
Other Programs To Save For College
A 529 plan is one way to save for college. Remember, we have a full guide on our approach to college savings here - and it helps you find other options.
If you're looking for ways to boost your college savings, check this out:
Backer
Backer is one of our favorite ways to save for college because they make gifting for college so easy. You can setup an account, link your 529 plan (in most states), and get a unique URL that you can share with friends and family to save for your children's college.
Plus, they have Backer Bucks, which allow you to earn rewards and rebates for the shopping you already do - directly deposited into your children's 529 plan.
Upromise
Upromise is another awesome tool to help you save for college because they have a lot of ways that you can earn money for your 529 plan. You can get rebates and rewards, and you can get cash back into your child's 529 plan by using the Upromise credit card.
Texas Financial Aid
Using a 529 plan isn't the only way to save money for college. Each state typically offers a variety of financial aid programs for their residents. These include scholarships and grants, and sometimes unique forgivable student loan opportunities.
Check out the list of Texas Student Loan and Financial Aid Programs.
Return to the full list of 529 Plans By State.
Editor: Clint Proctor Reviewed by: Ashley Barnett
