Alabama 529 Plan And College Savings Options

Alabama 529 Plans At A Glance

Alabama 529 Tax Deduction And Tax Rules

Alabama lets each taxpayer deduct up to $5,000 a year in contributions to CollegeCounts, or $10,000 for married couples filing jointly if both spouses contribute (Alabama Department of Revenue). The deduction goes to the contributing taxpayer, so a grandparent who files an Alabama return and puts money into a grandchild's account can claim it (CollegeCounts). Our state-by-state 529 tax deduction table shows how that compares with neighboring states.

Contributions postmarked by December 31 count for that tax year (Alabama Department of Revenue). Growth is tax-deferred and qualified withdrawals are tax-free, including withdrawals for an out-of-state college, which our list of qualified 529 plan expenses breaks down.

Alabama doesn't require money to stay in CollegeCounts for any set period before you withdraw it. The Revenue Department's rule allows the deduction in the year you contribute and only claws it back for non-qualified withdrawals, with no holding period (Ala. Admin. Code r. 810-3-15-.27), and the plan's February 2026 disclosure statement adds none (CollegeCounts). That means Alabama families paying tuition out of pocket can route up to $5,000 ($10,000 joint) through CollegeCounts first and still claim the deduction, a move states like Wisconsin and Montana have blocked, as our breakdown of 529 plan churning and withdrawal limits explains.

The Roth rule catches families off guard. Federal law lets a 529 that's been open at least 15 years roll up to $35,000 into the beneficiary's Roth IRA, but Alabama includes the rolled-over amount in taxable income, even though it skips the 10% add-back (Alabama Department of Revenue). Read our 529-to-Roth IRA rollover rules before you move leftover money.

Alabama conforms to federal 529 changes on a rolling basis and has confirmed the $20,000 K-12 limit for tax years starting in 2026 (Alabama Department of Revenue). The department's summary doesn't address the new federal category for postsecondary credential programs, and it lists 529-to-ABLE rollovers after 2026 as not tied to federal law, so confirm with the department before using either. Our breakdown of the 2026 529 plan expansion covers what changed federally.

How Alabama's 529 Plan Ranks

Alabama ranks 22nd of the 50 state plans in our best 529 plans rankings, which include Washington, D.C., with a 64.5% net return on investment. Our Net ROI score models $100 a month for 10 years at a 5% annual return, subtracts plan fees, and reinvests the value of the state tax break each year. CollegeCounts lands in the middle of the pack because its 0.17% fee is higher than the cheapest plans, while its 5% tax break is what carries the score.

Don't read this table as a reason to switch plans. Each state's score assumes a taxpayer in that state using its own plan, so an Alabama resident who moves to Georgia's lower-fee plan gives up the Alabama deduction and pays Alabama tax on withdrawals, which leaves them worse off. The ranking shows what a dollar is worth inside CollegeCounts compared with what families in other states get, and the full rankings table lists all 50 state plans.

The gap with the top of the list comes down to two levers Alabama controls. Indiana's 20% tax credit is what puts it at #1, and Alabama's 5% break and 0.17% fee keep it in the middle, so a larger deduction or lower fees would move Alabama families up. If that matters to you, share these numbers with your state legislators, and use our 529 plan tax deductions by state table to show how other states reward savers.

Should Alabama Residents Use CollegeCounts?

Yes, for nearly every Alabama taxpayer. A resident who picks another state's plan gets no Alabama deduction, and Alabama also taxes withdrawals from out-of-state plans, which makes a lower-fee plan elsewhere a worse deal (Alabama Department of Revenue). Our 529 plan tax deductions by state table shows how Alabama's break compares.

Families who already hold another state's plan can roll it into CollegeCounts without Alabama income tax, and our explainer on 529 plan rollovers and transfers covers the once-per-year federal limit. Nonresidents can open CollegeCounts too, since the plan has no residency or income requirements (CollegeCounts), but they should first check where to open a 529 plan in their own state.

Four years at an in-state Alabama public university runs close to $90,000 on campus, so the average CollegeCounts balance of about $25,600 covers a little more than one year. Our Alabama college costs and financial aid breakdown lists tuition by school, and our 529 savings benchmarks by age show what to aim for.

Alabama 529 Plan Details

Both CollegeCounts plans are run by Union Bank & Trust under the Alabama Savings Board, chaired by the State Treasurer (Alabama State Treasurer). As of June 30, 2026, CollegeCounts held $3.38 billion across 131,809 open accounts, and Alabama's three programs together ranked 30th among the states in 529 assets (The 529 Network). Alabama residents own about two-thirds of CollegeCounts accounts (CollegeCounts Q1 2026 board report), and our 529 plan and college savings statistics show how that compares nationally.

CollegeCounts Changes Under Review

The Alabama Savings Board took up four plan changes at its August 19, 2026 meeting, and the published resolutions don't record the votes (Alabama State Treasurer). We'll update this page once the plan documents change. Until then, the $475,000 cap and current fees above still apply, and our 529 plan contribution limits page tracks caps nationwide.

• ◆Raise the maximum account balance from $475,000 to $550,000 per beneficiary
• ◆Cut the advisor plan's A-share load from 3.50% to 2.50% and eliminate Fee Structure B
• ◆Drop the 20% and 40% equity target portfolios in both plans, leaving four static portfolios
• ◆Replace the Vanguard money market option with an FDIC-insured bank savings option

Other Alabama College Savings Programs

Upromise. Upromise lets you earn money for your CollegeCounts account through rebates and rewards on everyday spending, and the Upromise credit card sends cash back straight into your child's 529 plan (Upromise). You can link a CollegeCounts account to your Upromise profile, so the rewards stack on top of Alabama's state tax deduction.

CollegeCounts Scholarship. The CollegeCounts program funds a one-time scholarship of $4,000 for students entering a four-year Alabama college and $2,000 for two-year colleges (Alabama State Treasurer). Applicants need Alabama residency, financial need, and a 2.75 GPA, and the next window runs December 1, 2026 through February 15, 2027. The 2026 round paid $1.07 million to 403 students with no taxpayer money (Alabama Political Reporter), and our Alabama financial aid page lists the state's grants.

AlabamaABLE. Alabama residents with disabilities can save in AlabamaABLE, a 529A account run by the Alabama Savings Board that accepts contributions as small as $5 (AlabamaABLE). ABLE balances up to $100,000 don't count against SSI's $2,000 asset limit, which our 529 plan overview compares with regular college savings.

Leftover money. Families with money left after college can change the beneficiary to a sibling, pay down up to $10,000 of student loans, or roll to a Roth IRA, keeping Alabama's tax treatment of that rollover in mind. Our list of what to do with leftover 529 money covers each option, and Alabama graduates in teaching or health care should also check Alabama student loan repayment assistance programs.

Frequently Asked Questions

Related Alabama Resources

How We Sourced This Data

Plan details on this page come from the plan and the state: the CollegeCounts direct and advisor plan websites, The 529 Network 529 plan data as of June 30, 2026, the Alabama Savings Board's Q1 2026 CollegeCounts board report and August 19, 2026 meeting resolutions published by the Office of the Alabama State Treasurer, the CollegeCounts Direct Program Disclosure Statement (February 18, 2026), Alabama Administrative Code rule 810-3-15-.27, the Treasurer's PACT and CollegeCounts Scholarship pages, and AlabamaABLE. Tax rules come from the Alabama Department of Revenue's 529 FAQs and its October 2025 summary of federal tax law conformity. The college cost figure comes from our Alabama financial aid page, which draws on institutional cost pages and NCES IPEDS data, and scholarship results were cross-checked against the Alabama Political Reporter. Read more about how we fact-check and update content.

Page refreshed annually in September, after CollegeCounts publishes its updated fee schedule, and reviewed in January for tax season. Last full refresh: September 24, 2026.