How does the state tax deduction for 529 contributions work?

More than 30 states offer a state income-tax deduction or credit for 529 contributions, and it's a meaningful, immediate benefit on top of the federal tax-free growth. The amount varies widely: some states cap the deduction (for example, $5,000 single / $10,000 married per year), a few allow unlimited deductions, and a handful offer a credit instead. Most states require you to use their own plan to qualify, though a few grant "tax parity" for any state's plan. This deduction only reduces state taxes, not federal. If you have a one-time windfall, check whether your state lets you carry forward excess contributions over future years. Verify your specific state's rules and annual cap before contributing, since they change and differ significantly.