Does Texas Have a 529 Plan? The Three Options Compared

Yes. Texas sponsors three 529 plans: the Texas College Savings Plan (direct-sold), the LoneStar 529 Plan (advisor-sold), and the Texas Tuition Promise Fund (prepaid tuition). All three are administered by the Texas Comptroller of Public Accounts under Texas Education Code Chapter 54.¹ Because Texas has no state income tax, the appeal of a Texas 529 plan comes from federal tax-free growth and an unusually strong state creditor protection, not from a state deduction.

The Three Texas 529 Plans

Texas College Savings Plan

This is the direct-sold investment plan. You open it yourself through the plan’s website and pick from age-based portfolios that grow more conservative as your child nears college, or from static portfolios that hold a fixed strategy.² The minimum to open is $25, and automatic contributions can run as low as $15. Total annual asset-based fees range from 0.31% to 0.53% depending on the portfolio and are reviewed each year.³ Enrollment is open year-round.

LoneStar 529 Plan

The LoneStar plan is the advisor-sold version. The investment options are market-based like the direct-sold plan, but you enroll and manage the account through a financial advisor who helps you pick a strategy.⁴ Fees generally run higher than the direct-sold plan because they include advisor compensation. If you want ongoing professional guidance, this version is built for you; if you don’t, the direct-sold plan holds the same type of investments at lower cost. Ask for a full fee breakdown before you enroll, and compare it to the Texas College Savings Plan.

Texas Tuition Promise Fund

The Tuition Promise Fund is a prepaid plan, not an investment plan. You buy tuition “units” at today’s prices, and those units can later be redeemed to cover undergraduate tuition and required fees at most Texas public colleges and universities (medical and dental institutions are excluded).⁵ The appeal is price certainty: whatever tuition does between now and enrollment, your units match the published rate at Texas public schools.

The smallest units start around $25. There’s a one-time $25 enrollment fee, and after you buy at least one unit, further contributions can be as little as $15. Enrollment is seasonal rather than year-round. The general window runs September 1 through February 28 (February 29 in a leap year), with a newborn extension through July 31 for beneficiaries under one year old.⁶ Miss the window and you wait until the next one opens.

Where You Can Spend the Money

Two of the three plans travel well. The Texas College Savings Plan and the LoneStar 529 Plan can pay qualified expenses at any accredited college, university, or vocational school in the country, including graduate programs.² All three Texas plans also cover registered apprenticeship program expenses.⁷

The Tuition Promise Fund is designed around Texas public schools. If your beneficiary ends up at a private Texas school or an out-of-state college, the units can still be redeemed, but at their transfer value rather than their full tuition-matching value.² That’s the trade-off for locked-in tuition pricing: the guarantee only pays off in full at the schools the plan is built for.

Taxes in a State With No Income Tax

Texas has no state income tax, so there’s no state deduction or credit for 529 contributions. There’s also no state tax on the growth, which is the point: the full federal benefit is what you’re getting. Money inside any Texas 529 grows free of federal tax, and withdrawals used for qualified expenses come out free of federal tax too.

Pull money out for something that isn’t a qualified expense and the earnings portion is taxed as ordinary federal income plus a 10% federal penalty. Only earnings get hit; the contributions you put in come back to you tax-free and penalty-free because you already paid tax on that money. The 10% penalty is waived if the beneficiary receives a scholarship (up to the scholarship amount, though income tax on the earnings still applies), dies, becomes disabled, or attends a U.S. military academy.

Contribution Limits

Texas doesn’t cap annual contributions, but the combined balance across all Texas 529 accounts for a single beneficiary cannot exceed $500,000. Once you hit the ceiling, no new contributions are accepted until the balance drops back under it.³

Contributions count as gifts for federal purposes. In 2026 you can give $19,000 per beneficiary ($38,000 for a married couple splitting the gift) without any gift tax reporting.⁸ A rule unique to 529 plans lets you front-load five years of gifts in one shot — up to $95,000 per person or $190,000 per married couple — and treat it as spread evenly over five years. You report the election on IRS Form 709, and you can’t make additional gifts to that beneficiary during the five years without exceeding the annual exclusion.⁹

Creditor Protection

This is where Texas does better than most states. Under Texas Property Code Section 42.0022, funds held in a 529 account are generally exempt from creditors and cannot be seized to satisfy debts, including in bankruptcy.¹⁰ The protection applies whether the beneficiary is the account holder’s child or grandchild. For a family worried about long-term financial stability, that statute is a meaningful reason to keep education savings in a Texas 529 rather than a taxable brokerage account.

How a 529 Affects Financial Aid

If a parent owns the 529 and the student is a dependent, the balance is reported as a parent asset on the FAFSA. Parent assets are assessed at a maximum rate of about 5.64%, so a $50,000 balance would reduce aid eligibility by roughly $2,820 at most. If the student is independent and doesn’t report parent information, the 529 is a student asset instead, which hits the aid calculation harder.¹¹ A parent’s 529 accounts for other children don’t get reported on the current student’s FAFSA.

Leftover Funds and the Roth IRA Rollover

Since 2024, the SECURE 2.0 Act allows unused 529 money to be rolled into a Roth IRA for the beneficiary.¹² The conditions:

The 529 account must have been open for the beneficiary for at least 15 years.
Contributions made in the last five years, and their earnings, can’t be rolled over.
The annual rollover is capped at the Roth IRA contribution limit for the year ($7,500 for under-50s in 2026), reduced by any other IRA contributions the beneficiary makes that year.
The lifetime cap per beneficiary is $35,000.
It has to be a direct transfer from the 529 to a Roth IRA in the beneficiary’s name.

Reaching the full $35,000 takes at least five years of maximum annual rollovers, so this works as a long-term escape valve for leftover savings, not a quick clean-out.

Opening an Account

To open any Texas 529 you need a Social Security number or taxpayer ID for both the owner and the beneficiary, dates of birth, a physical U.S. address, and bank routing and account numbers to fund the account electronically.

For the Texas College Savings Plan, you enroll online through the plan’s portal, pick your portfolios, sign the participation agreement, and make the initial $25 contribution in one sitting.³ The LoneStar 529 Plan is opened through a financial advisor.⁴ For the Tuition Promise Fund, enrollment follows the September 1 to February 28 window (with the newborn extension through July 31). You pick how many units to buy and whether to pay in a lump sum or over time, and you should name a successor owner on the enrollment form so the account continues if you pass away.⁶ Before you commit to any of the three plans, read its Program Description for the current fee schedule, risks, and investment options.

1
State of Texas. Texas Education Code Section 54-701 – Definitions
2
Texas Comptroller of Public Accounts. What 529 College Plans Can Do for You
3
Texas College Savings Plan. Overview
4
Texas Comptroller of Public Accounts. Texas Comptrollers Office Announces Reduction in Some Fees, Changes to the Advisor-Sold LoneStar 529 Plan
5
Texas Tuition Promise Fund. What Is a Prepaid Plan
6
Texas Tuition Promise Fund. How It Works
7
Texas Legislature Online. Bill Analysis Senate Research Center SB 1094 87R
8
Internal Revenue Service. Gifts and Inheritances
9
Internal Revenue Service. 529 Plans – Questions and Answers
10
State of Texas. Texas Property Code Chapter 42 – Personal Property
11
Federal Student Aid. 2026-27 FAFSA Form
12
Texas Comptroller of Public Accounts. SECURE 2.0 Act Section 126