I live in MD, which has a pretty crappy 529 plan. Fees of 0.60% and up so I set up my kid's 529 in NY. But from what I've found I can roll funds from the MD plan to another plan without recapture of state tax deductions. So now I'm considering contributing a lump sum to the MD plan, take the income deduction for a few years, then roll it over to my NY account. Contributions above the limit can be rolled to future tax years. The gains aren't exactly huge so I'm not sure it's worth the hassle, but from my brief research it would looks something like this:
Max deductible contribution: $2,500
State tax rate: ~5% (
http://www.tax-rates.org/Maryland/income-tax)
Tax savings per year: $125
Rollover fee: $75
Setup fee: $50
So if I contribute $10,000 I'll gain $625 total from the tax deduction over the next five years, and minus fees earning $500 (I'm aware the tax is progressive so I'd pay slightly less, but it appears to be reasonably accurate).
Anyone else done this? Might make more sense in a state with a higher tax rate. Anything I'm missing?