Virginia 529 Plan: What College Savers Should Know

According to the Federal Reserve, in June 2022, Virginia held about:^[1]

• $82.3 billion in 529 college savings accounts
• $2.87 billion in 529 prepaid tuition accounts
• $85.2 billion across all 529 accounts

That's the largest 529 balance in the country.

529 college savings plans help people save for educational expenses by investing in the stock market and waiting for their investments to grow. You can save money for yourself or for beneficiaries like children or grandchildren. In Virginia, participating in a 529 plan comes with tax benefits.

Keep reading to learn about the two Virginia 529 plans and tax benefits for participating.

Virginia 529 Plans

Virginia offers two 529 plans: a direct-sold plan and an advisor-sold plan. As the name suggests, the advisor-sold plan comes with access to a financial advisor who can help you make investment decisions. This plan may charge higher fees than the direct-sold plan.

Here's the basic information about each plan:

Invest529 (Direct-Sold)

• Requires State Residency? No
• K-12 Expenses Eligible? Yes
• Fees: 0-0.569%
• Performance Notes:
  • The 2024 Target Enrollment Portfolio has averaged 4.75% in annual returns since its creation in 2005.
  • The 2030 Target Enrollment Portfolio has averaged 5.66% in annual returns since its creation in 2011.
  • This plan includes other target enrollment portfolios as well as portfolios based on your risk tolerance (e.g., conservative, moderate, or aggressive).

CollegeAmerica (Advisor-Sold)

• Requires State Residency? No
• K-12 Expenses Eligible? Yes
• Fees: 0.27-1.96%
• Performance Notes:
  • The American Mutual Fund has gained 11.62% in average annual returns in the past 10 years.
  • The American Balanced Fund has gained 8.48% in average annual returns in the 10 years.

Virginia 529 Tax Deduction

Virginia residents can deduct contributions to the Virginia 529 plan on their taxes. Here's how that works, according to the College Savings Plan Network:^[2]

State residents have an annual deduction limit of $4,000 a year per 529 account. But, if you exceed that limit in a given year, it will carry over to the next year, and it will keep carrying over year after year.

Also, if someone else contributes to a 529 account that you own, that counts toward your deductible amount.

If you're over 70, your contribution to a 529 account is fully deductible from your taxes.

Virginia residents can contribute up to $550,000 in total to 529 plans. Virginia also allows savers to use 529 plans for K-12 educational expenses.