Well I had another question in mind, but my state NC has finally updated the 529 plans to include Elementary and High School. So no my question is, I think I would prefer to use Vanguard or TRowe to do my 529 and not NC, would I lose any tax benefit or be punished in NC for not using theirs?

If no punishment, what is the advantage of using your state's 529s?

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When deciding between my state 529 plan and either another states 529 plan or a plan not run by a state, the first question to ask is does my state allow a tax deduction for my contributions? And if so, does it only apply to contributions to the plan run by my state.

It appears that North Carolina doesn't give a tax break on contributions. The page describing the tax benefits doesn't mention a tax deduction on contributions.

Earnings on your NC 529 Account are free from North Carolina and federal taxes

An important advantage of saving in an NC 529 Account is that earnings on your account aren’t subject to North Carolina or federal taxes as long as they, along with your contributions, are used to help pay for Qualified Higher Education Expenses (QHEE). Tuition, fees, room and board, books, computers and required equipment are examples of expenses considered qualified.

The earnings portion of withdrawals not used for QHEE expenses is subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. The availability of tax benefits may be contingent on meeting other requirements.

The features of a qualified tuition program are complex and involve significant tax issues. For more detail, visit the CFNC.org page here.

This means that putting 529 money into a program not run by your state would not cause you to miss a deduction for contributions.

The question now is will you be able to pull the money from a program not run by North Carolina and send it to your school. The tax law change is so new not all states/programs schools have made the necessary changes. If the plan you contribute to doesn't have a mechanism for sending money to the private K-12 school, you could have money locked in an account that doesn't have a way to fund the education you want.

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