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Saving for education · 529

New York's 529 College Savings Program

A 529 is an investment account for school costs. The money grows without federal tax when you spend it on qualified costs. New York taxpayers also get a state deduction.

  • Deduct up to $5,000 a year from New York income ($10,000 if married filing jointly).
  • Pays for college, career school, registered apprenticeships and up to $10,000 of student loans.
  • K-12 warning: federal law allows K-12 costs, but New York treats K-12 tuition withdrawals as nonqualified and takes back the deduction.
  • Leftover money can go to a family member, or up to $35,000 to the student's Roth IRA.
Money put in each year (blue) and growth (gold) make taller bars over time yr 1yr 18 put in growth (assumed)
General information, not financial, tax or legal advice. The official rules are in NY 529's Disclosure Booklet and on the sites linked at the bottom. Investments can lose value. Ask NY 529 or a tax professional about your situation. Facts checked November 7, 2026.

Two ways to use New York's 529

NY 529 Direct PlanNY 529 Advisor-Guided Plan
How you open itYourself, online at nysaves.org, by mail, or by phone.Only through a financial professional.
CostSmaller fees. No minimum to start.Higher fees and expenses, which include pay for the financial professional.
New York deductionBoth are part of New York's 529 College Savings Program. Ask the plan how the $5,000 / $10,000 limit applies if you use both.

How to open a Direct Plan account

  1. Get what you need.Your Social Security number or ITIN, your permanent U.S. address, the child's (beneficiary's) name, birth date and SSN or ITIN, and your bank account number if you want automatic deposits.
  2. Go to nysaves.org and choose "Open an account".You can also call or mail a form. There are no age or income limits for owners.
  3. Pick an investment option.Age-based options change slowly from stocks to safer choices as the child gets close to college. Read the Disclosure Booklet first.
  4. Name a successor owner.That person takes over if something happens to you.
  5. Set an automatic deposit.Any amount. Many families pick payday.
  6. Share a gift link or the account details with relativesso they can add money for birthdays. Checks from others up to $10,000 each are accepted (NY 529 FAQ).

The New York State tax deduction

Single, head of household

Up to $5,000

a year deducted from New York taxable income.

Married filing jointly

Up to $10,000

a year, to accounts owned by either spouse.

Deadline

December 31

The deduction is for money put in during the tax year.

How money moves through a 529

Money in, money grows, money out You put money in and may get a New York deduction. It grows without yearly tax. When you take it out there are three paths: qualified college costs have no federal or New York tax; K-12 tuition has no federal tax but New York adds back the deduction; anything else pays tax on earnings plus a 10 percent extra federal tax plus the New York add-back. 1. Money inNY deduction up to$5,000 / $10,000 2. It growsno tax each year(can also go down) College, career school, apprenticeshipFederal: no tax. New York: no tax.Also student loans (to $10,000) and Roth rollovers. K-12 tuitionFederal: no tax (to $20,000 a year).New York: nonqualified, deduction added back. Anything elseFederal: tax on earnings + 10% extra.New York: tax on earnings + add-back. Money in, money grows, money out: three paths 1. Money inNY deduction up to $5,000 / $10,000 2. It growsno tax each year (can also go down) 3. Money out: three paths ✅ College, career school, apprenticeshipFederal: no tax. New York: no tax.Also student loans (to $10,000) andRoth rollovers. ⚠️ K-12 tuitionFederal: no tax (to $20,000 a year).New York: nonqualified, deductionadded back. ❌ Anything elseFederal: tax on earnings + 10% extra.New York: tax on earnings + add-back.
Only the earnings part of a withdrawal can be taxed; the money you put in comes back without income tax. New York's add-back is about the deduction you took.

What the money can pay for

UseFederal ruleNew York rule
College and career schoolTuition, fees, books, supplies, required equipment, computers and internet; room and board if enrolled at least half-time (IRS Pub. 970). The school must be eligible for federal student aid.✅ Qualified.
Registered apprenticeshipFees, books, supplies and equipment required for a program registered with the U.S. Secretary of Labor (§529(c)(8)).NY 529 lists it as a qualified withdrawal. Confirm with NY 529.
Student loansUp to $10,000 lifetime per person, for the beneficiary and for each of the beneficiary's siblings (§529(c)(9)).✅ Qualified since New York's 2024 law (Chapter 310 of the Laws of 2024).
K-12 tuitionPublic, private or religious elementary or secondary school. Limit $20,000 per student per year from 2026 ($10,000 before).⚠️ Nonqualified. New York recaptures the deduction. NY 529 sends K-12 tuition withdrawals only to the account owner.
Other K-12 costs (new in 2025)For withdrawals after July 4, 2025: curriculum and materials, books, online educational materials, tutoring, test fees, dual enrollment and educational therapies (§529(c)(7)). Counts toward the $20,000.❓ Not decided. New York "has not yet determined" if these are qualified.
Credential programs (new in 2025)Costs of recognized postsecondary credential programs (§529(e)(3) and (f)).❓ Not decided for New York.
Roll to student's Roth IRAUp to $35,000 lifetime; see the rules further down this page (§529(c)(3)(E)).✅ Qualified since Chapter 310 of the Laws of 2024.
Roll to an ABLE accountAllowed for the beneficiary or a family member, within the yearly ABLE limit; made permanent in 2025.Ask NY 529 how New York treats it.

⚠️ K-12: federal and New York rules are different

In short: the 2025 federal law (Public Law 119-21, often called the One Big Beautiful Bill Act) made more K-12 costs qualified and raised the yearly K-12 limit to $20,000 starting in 2026. New York has not followed for tuition: "distributions for K-12 tuition are considered nonqualified withdrawals" and require "the recapture of any New York State tax benefits that have accrued on contributions" (nysaves.org FAQ). For the other new K-12 costs, New York "has not yet determined" what it will do.

What to do: before you use a New York 529 for any K-12 cost, call NY 529 (see Sources) and ask a tax professional. Keep receipts. If New York decides later, this page will be updated.

If K-12 costs are your main goal, a Coverdell ESA or a plain savings account may be simpler. See Example 5 on this page for the math.

Leftover money: the 529-to-Roth IRA rollover

A 2022 federal law (SECURE 2.0) lets some leftover 529 money move into the student's own Roth IRA. The rules:

  1. The 529 account must have been open for the same beneficiary for at least 15 years.
  2. Money put in during the last 5 years (and its earnings) cannot be moved.
  3. It must be a direct transfer from the 529 to a Roth IRA in the beneficiary's name.
  4. Each year's rollover counts toward the yearly IRA limit ($7,500 for 2026), together with any other IRA money the student puts in, and the student needs earned income at least equal to it.
  5. Lifetime limit: $35,000 per beneficiary.

New York treats these rollovers as qualified (Chapter 310 of the Laws of 2024), so no New York add-back.

Family, gifts and grandparents

Changing the beneficiary

You can change the beneficiary at any time to a member of the family of the original beneficiary (nysaves.org). Under federal law that includes brothers and sisters, parents, children, nieces and nephews, aunts and uncles, in-laws, their spouses, and first cousins (§529(e)(2)). No tax if the new person is a family member.

Gift tax and "superfunding"

Grandparent-owned accounts

Grandparents can open their own account for each grandchild. A grandparent who is a New York taxpayer and the account owner may take the New York deduction. See the FAFSA section next.

529s and the FAFSA (federal college aid form)

Who owns the 529How the FAFSA treats it
Parent (student is a dependent)Reported as a parent investment if it is for the student (FSA Handbook). Parent assets affect aid much less than student money.
Student who is the beneficiary but not the owner"The value is not reported as a student asset" (FSA Handbook).
Grandparent or other relativeNot listed on the FAFSA as an asset. Since the 2024-25 FAFSA, the form no longer asks about money others paid for the student. Some private colleges use another form (the CSS Profile) that may ask. Check each college.
WithdrawalsTax-free withdrawals that are not more than qualified costs are not counted as other financial help (FSA Handbook).

Taking money out for something else

A nonqualified withdrawal is money taken out and not used for qualified costs. Three things can happen:

  1. Federal income tax on the earnings part (your form 1099-Q shows contributions and earnings).
  2. A 10% extra federal tax on the earnings part. Exceptions include the student's death or disability, a tax-free scholarship (up to its amount), and attending a U.S. military academy (IRS Pub. 970).
  3. New York: the earnings are taxed as income, and the New York deduction you took on that money is added back to your income ("recapture").
Example with made-up numbers

A parent takes out $10,000 for a car. The 1099-Q shows $6,000 of contributions and $4,000 of earnings. The parent deducted all $6,000 on New York returns. We assume a 12% federal rate and a 5.5% New York rate.

Federal tax on earnings: $4,000 × 12% = $480 Extra 10% federal tax: $4,000 × 10% = $400 NY tax on earnings: $4,000 × 5.5% = $220 NY add-back of deduction: $6,000 × 5.5% = $330 Total cost (about) = $1,430 of the $10,000

Your real rates and the New York add-back worksheet decide the true amount.

🧮 529 growth calculator

Try your own numbers. The growth rate is an assumption, not a promise. Real investments go up and down and can lose money. Nothing you type is saved or sent.

You put in$0
Assumed growth$0
Total at the end$0

■ money put in   ■ assumed growth

Math: monthly deposits, growth added each month at the yearly rate ÷ 12, no fees or taxes. Real plans have small fees.

Six examples with made-up numbers

All growth uses an assumed rate, added monthly. New York tax savings use an assumed 5.5% New York rate. Your numbers will be different.

Example with made-up numbers

1. 👶 A newborn

Ana is single and pays New York tax. She saves $100 a month for her baby for 18 years. Assumed growth: 5% a year.

Put in: $100 × 12 months × 18 years = $21,600 End value (5% assumed) ≈ $34,920 Growth ≈ $13,320 NY deduction each year: $1,200 (under the $5,000 limit) NY tax saved each year: $1,200 × 5.5% ≈ $66 (≈ $1,188 over 18 years)

If the money pays for college, the $13,320 of growth is free of federal and New York tax.

Example with made-up numbers

2. 🧑‍🎓 A middle-schooler (starting at age 11)

The Lee family (married, filing jointly) starts when their son is in 6th grade: $250 a month for 7 years. Because college is closer, they choose a more careful option and assume 4% growth.

Put in: $250 × 12 × 7 = $21,000 End value (4% assumed) ≈ $24,189 Growth ≈ $3,189 NY deduction each year: $3,000 (under the $10,000 joint limit) NY tax saved each year: $3,000 × 5.5% ≈ $165 (≈ $1,155 over 7 years)

Less time means less growth, but the New York deduction still helps every year.

Example with made-up numbers

3. 👵 A grandparent's gift

Grandma Rosa (single, New York taxpayer) opens her own 529 for her granddaughter in 2026 and puts in $19,000 once. She makes no other gifts to her that year.

Gift tax return needed? No: $19,000 is not more than the 2026 yearly exclusion ($19,000) NY deduction (2026): $5,000 (her single limit) → saves ≈ $5,000 × 5.5% = $275 Not deducted: $19,000 − $5,000 = $14,000 After 10 years (5% assumed): $19,000 grows to ≈ $31,293 FAFSA: a grandparent-owned 529 is not listed as an asset.

Tip: if Rosa put in $5,000 a year for 4 years instead, she could use the deduction each year ($5,000 × 4 = $20,000 deducted).

Example with made-up numbers

4. 👧👦 Two children

Maria and James file jointly. They put $6,000 a year into each child's account ($12,000 total).

Total put in each year: $6,000 + $6,000 = $12,000 NY limit (one joint return): $10,000 NY deduction: $10,000 (the extra $2,000 is not deducted) NY tax saved (5.5%): $10,000 × 5.5% = $550 a year

The limit is per tax return, not per child. Putting in $5,000 per child would use the whole deduction.

Example with made-up numbers

5. 🏫 Private K-12 tuition in New York

The Okafor family (joint) has a New York 529 and wants to take out $15,000 for 2026 private middle school tuition. In past years they deducted $10,000 of the money they now take out.

Federal: $15,000 is under the $20,000 K-12 limit → no federal tax New York: K-12 tuition is NONQUALIFIED NY add-back of the deduction: $10,000 × 5.5% ≈ $550 more NY tax NY tax on the earnings part: ask NY 529 / a tax professional Money goes to the account owner (not the school).

Compare: paying tuition from a savings account or a Coverdell ESA avoids the New York add-back. Ask before you decide.

Example with made-up numbers

6. 🎉 Leftover money to a Roth IRA

Leo's 529 was opened when he was born in 2004. In 2026 he is 22. He finished college with a scholarship and now works. He has $30,000 left in the 529. $2,000 of it was put in during the last 5 years. Leo earns $40,000 a year and makes no other IRA contributions. We assume the IRA limit stays $7,500 (it may change).

Account open 15+ years? 2004 → 2026 = 22 years ✔ Can move: $30,000 − $2,000 (last 5 years) = $28,000 Lifetime limit: $35,000 → $28,000 fits ✔ Year 1: $7,500 Year 2: $7,500 Year 3: $7,500 Year 4: $5,500 = $28,000 Left in the 529: $2,000 → can go to his sister, or wait and move later

No federal or New York tax on these rollovers when the rules are met.

❓ Questions

Is there a minimum or maximum?

The Direct Plan has no minimum to start. New York sets a maximum total balance per beneficiary; it is in the Disclosure Booklet on nysaves.org.

Can I use New York's plan if I live in another state?

Yes. Anyone in the U.S. can. The New York deduction only helps New York taxpayers; your own state may have its own benefit.

Do I need a New York 529 to get the New York deduction?

Yes. The deduction is for New York's 529 College Savings Program. Money put into another state's plan does not get the New York deduction.

When should I take money out?

Take it out in the same calendar year you pay the cost, and keep the receipt. NY 529 says to allow about 10 business days for money to arrive.

Can a 529 pay for a Goal100 plan or other learning subscription?

Federal law now lists "online educational materials" for K-12, but New York has not decided how it treats those withdrawals. See Taxes and your subscription and ask NY 529 first.

What if the market goes down right before college?

That can happen. Age-based options move toward safer investments as college gets close. You can also change your investment choice twice a year under federal rules (Pub. 970), or when you change the beneficiary.

Disclaimer. General information, not financial, tax or legal advice. Goal100 does not sell or recommend any plan. Read the NY 529 Disclosure Booklet and ask a qualified professional. Last checked November 7, 2026.

🔗 Official sources (checked November 7, 2026)

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