Here's the good news:  Currently, 31 states plus the District of Columbia offer an upfront tax break for participating in a 529 savings plan. 

In most cases, you must enroll in one of your home state’s 529 plans in order to claim this state income tax benefit.  But in Pennsylvania, Kansas, Maine, and Arizona, residents can qualify for a tax break even when they invest in another state’s plan.

The form this tax break takes can vary:  Many states offer savings plan participants a tax deduction—a reduction in your total income subject to taxes—but Indiana, Vermont and Utah offer tax credits that reduces dollar-for-dollar the total amount of taxes due.

One important caveat:  The maximum size of this tax break may be limited.  In Oregon, for instance, residents may claim an annual state income tax deduction only up to $4,000 per tax return (or $2,000 per person if married and filing separately), although excess contributions in a given year may still be claimed as deductions during the following four years.  But in Colorado, South Carolina, West Virginia and New Mexico, there is no cap.

Finally, keep in mind that other potential in-state benefits go beyond just taxes:  Some states will permit the college savings plan assets of in-state residents to be omitted from need-based financial aid calculations.  Other states even offer plan participants bonus scholarships or “matching grants” that effectively multiply each contribution you make.