How to Start a 529 Plan in Texas: Pick, Enroll, and Fund

Opening a 529 plan in Texas takes about 15 minutes online, requires a Social Security number for both you and the beneficiary, and can be funded with as little as $25.¹ To start a 529 plan in Texas, you pick one of three state-sponsored options overseen by the Texas Prepaid Higher Education Tuition Board, complete an application online or on paper, and link a bank account for your first contribution. Earnings grow free from federal income tax when used for qualified education costs.² Texas has no state income tax, so there’s no state deduction to chase, and no state tax penalty for choosing a plan sponsored by another state if a better one fits your needs.

Pick One of the Three Texas Plans

Texas sponsors three 529 plans. The right one depends on whether you want to manage investments yourself, work through an advisor, or lock in today’s tuition rates.

The Texas College Savings Plan is the direct-sold option and the one most Texans open. You set it up and manage it yourself at texascollegesavings.com with no enrollment fee. It offers age-based portfolios that shift toward conservative holdings as the beneficiary nears college, plus static portfolios if you want a fixed allocation. The minimum to open is $25, one-time contributions are $25 minimum, and automatic recurring deposits drop the minimum to $15.¹

The LoneStar 529 Plan is the advisor-sold alternative.³ You open and manage it through a financial advisor, which adds advisory fees on top of plan costs. It makes sense if you already work with an advisor who handles your broader finances. Otherwise the direct-sold plan gives similar investment flexibility without the extra fee layer.

The Texas Tuition Promise Fund works completely differently. Instead of investing in the market, you buy “tuition units” that lock in today’s tuition rates at Texas public colleges and universities. One unit covers roughly one percent of tuition and required fees for 30 semester hours at the relevant pricing tier.⁴ There is a one-time $25 enrollment fee. General enrollment runs through February 28 each year, and newborns under age one get until July 31. The trade-off: your money is tied to Texas public college tuition. If the beneficiary goes out of state or to a private school, you can still use the funds, but the value may not keep pace with that school’s costs.

Residency rules differ. The two savings plans are open to residents of any state. The Tuition Promise Fund is stricter: if the beneficiary is a Texas resident, any U.S. citizen or resident alien can open an account; if the beneficiary lives outside Texas, the purchaser must be a Texas resident and the beneficiary’s parent.⁴

What to Have Ready Before You Apply

Gather these items before you start the application:

Social Security or Taxpayer ID numbers for you (the account owner) and the beneficiary.
Dates of birth for both of you.
Your current mailing address.
Bank account and routing numbers to link for deposits and withdrawals.
A phone number and email address for account communications.
Optional but recommended: the legal name, date of birth, and contact information for a successor owner.

The beneficiary can be your child, a grandchild, a niece or nephew, a friend’s child, or yourself. You don’t need to be related. The enrollment form includes a section for the relationship, and the beneficiary’s legal name must match official records exactly to avoid problems with future distributions.

How to Enroll and Fund the Account

The steps are similar across all three plans.

Confirm your plan choice. If you want the Tuition Promise Fund, check that you are inside the enrollment window.
Complete the application. Use texascollegesavings.com for the direct-sold plan, lonestar529.com (or your advisor) for the LoneStar 529, and texastuitionpromisefund.com for the prepaid plan. Paper applications are available if you prefer to mail enrollment.
Choose your investments. For the savings plans, select an age-based portfolio that adjusts automatically or a static portfolio that holds your chosen allocation. For the Tuition Promise Fund, decide how many tuition units to buy and at which pricing tier.
Make your initial contribution. The Texas College Savings Plan needs $25 to open. The Tuition Promise Fund charges a $25 application fee on top of unit purchases. Fund the account by electronic bank transfer using the account and routing numbers you provided.⁵⁴
Confirm activation. You will get a confirmation email once your application is processed and funds post. From there, log in to the dashboard to track performance, change contributions, update personal information, or change the beneficiary.

With the savings plans you can set up automatic recurring contributions after enrollment. For the Texas College Savings Plan, that is where the $15 minimum applies, which is useful for dollar-cost averaging into your chosen portfolio over time.¹

Name a Successor Owner

A successor owner inherits full management rights over the account, including the ability to change the beneficiary or make withdrawals. The designation typically overrides your will and skips probate, so the account transfers directly without court involvement.⁶ If you become legally incapacitated without one named, control defaults to whatever applicable law dictates, which can mean a lengthy legal process. You can name a successor during enrollment or add one later through the plan’s website or a paper form. Only one primary successor is allowed per account.

What the Money Can Be Spent On

Tax-free withdrawals cover a broader range of costs than most people expect:⁷

Tuition, fees, books, supplies, equipment, and room and board at any eligible postsecondary institution that participates in federal student aid programs. Room and board qualifies only if the student is enrolled at least half-time, and the amount cannot exceed the school’s published cost of attendance.
Up to $10,000 per year for K-12 tuition at public, private, or religious elementary and secondary schools. Tuition only, not books or other costs. The limit is per beneficiary per year, so multiple 529 accounts for the same child share the same $10,000 cap.
Computers, printers and other peripherals, internet access, and educational software used by the beneficiary. Equipment used primarily for entertainment does not qualify.
Up to $10,000 in lifetime student loan repayments per beneficiary.
Fees, textbooks, supplies, and required equipment for apprenticeships registered with the U.S. Department of Labor.

Contribution Ceilings and Gift Tax

There is no annual contribution limit on 529 plans, but Texas caps the aggregate balance across all Texas 529 accounts at $370,000 per beneficiary.⁸ Once an account hits the cap, new contributions stop, but investment earnings can still push the balance higher.

For gift tax purposes, 529 contributions count as gifts to the beneficiary. In 2026, you can contribute up to $19,000 per beneficiary without triggering a gift tax return, or $38,000 for married couples who split gifts.⁹ A “superfunding” election lets you contribute up to five years’ worth in one shot: $95,000 per beneficiary, or $190,000 for married couples, spread over five years on your tax return. No additional gifts to that beneficiary are allowed during the five-year period, and if you die before the five years are up, a prorated portion comes back into your taxable estate.

If Plans Change

Withdrawing money for anything other than qualified education expenses triggers regular federal income tax plus a 10% additional tax on the earnings portion.² Your original contributions come back tax-free. The 10% penalty is waived (though income tax on earnings still applies) if the beneficiary receives a scholarship, attends a U.S. service academy, dies, or becomes disabled.

Before taking a non-qualified withdrawal, consider changing the beneficiary. You can switch to a sibling, first cousin, parent, or even yourself without triggering taxes or penalties, which keeps the tax-free growth intact.

Since 2024, unused 529 money can also be rolled into a Roth IRA in the beneficiary’s name. The rules are strict: the 529 account must have been open for the current beneficiary for at least 15 years; the specific contributions being rolled over must have been in the account for at least five years; annual rollovers cannot exceed the Roth IRA contribution limit for the year ($7,500 in 2026, shared with any direct Roth contributions the beneficiary makes);¹⁰ the lifetime cap is $35,000; and the beneficiary must have earned income at least equal to the rollover amount. Changing the beneficiary on a 529 account may restart the 15-year clock, and the IRS has not issued definitive guidance on that point, so avoid beneficiary changes in the years before a planned rollover.

How a 529 Affects Financial Aid

A 529 plan owned by a parent or the student is reported as a parent asset on the FAFSA. Parent assets are assessed at a maximum rate of 5.64%, so a $10,000 balance might reduce aid eligibility by roughly $564. That is gentle compared to money held in the student’s own name, assessed at 20%. Grandparent-owned 529 distributions are no longer reported as student income under rules effective for the 2024–25 award year and beyond, so a Texas grandparent who wants to help can open their own account without the old aid penalty.

1
Texas College Savings Plan. Overview
2
Office of the Law Revision Counsel. 26 U.S. Code 529 – Qualified Tuition Programs
3
LoneStar 529 Plan. LoneStar 529 Plan
4
Texas Tuition Promise Fund. Essential Enrollment Information
5
Texas College Savings Plan. FAQs
6
Texas College Savings Plan. Plan Description and Savings Trust Agreement
7
Internal Revenue Service. 529 Plans: Questions and Answers
8
Texas Tuition Promise Fund. Plan Benefits
9
Internal Revenue Service. Whats New – Estate and Gift Tax
10
Internal Revenue Service. Retirement Topics – IRA Contribution Limits