It’s always interesting to note how excited we can get over trivial things. Scotchguard the seats in my new car? Only $500? Sign me up! (Note: As of this writing a can of Scotchguard will set you back $8 on Amazon.)

Taxes present the same trapping. Jump through hoops to save $5? It’s a deal!

The desire to reduce one’s tax burden is twofold – no one wants to pay more taxes and we live in a cost conscious world.

The reality, however, is often less exciting the idea.

Take the §529 college savings plan. A wonderful planning tool. Some of the excellent features include tax-deferred growth and tax-free withdrawals if used for qualified education expenses.

In choosing a §529 plan many factors must be considered. What are the internal costs of the program? Is there a sales charge? What are the investment options? What’s the minimum initial and ongoing investment?

One item mentioned often is whether there’s an upfront tax break for contributions. Many states offer such a perk – some for contributing to its plan while others a bit more progressive in providing this perk for contributing to any state’s plan.

Here’s where some of us put on our blinders. We’re so focused on the tax break we forget to figure out if it’s worthwhile. We ignore the benefits of other options and focus solely on whether we can get an upfront tax break. It’s a pennywise and pound foolish approach.

The folks at Morningstar put together this graphic showing the hypothetical upfront tax break available when making a contribution to a §529 plan. In many cases it’s around $100 – not exactly the thing that should get us hot and bothered given the excess value created by some of the better plans.

We’re not suggesting forgoing an upfront tax break. Rather we’re suggesting it’s one piece of a larger puzzle. Which §529 plan is right for you? Give us a call and we’ll be happy to discuss.