(MONEY Magazine) – If you invest in an out-of-state 529 college savings plan, you may owe more in state taxes next year. In recent months, four states have announced that, in an effort to close budget gaps, they would tax residents who invest in out-of-state 529 plans. Maine and Illinois will tax as income any withdrawals from out-of-state plans. (Alabama, Arkansas and Pennsylvania, among others, already tax out-of-state withdrawals.) Tennessee plans to tax dividends and interest. And New York plans to punish residents who roll over New York State 529 assets to an out-of-state program with a capital-gains tax on any earnings.

Don't panic. For now, only a handful of states levy a tax, and Maine's assessment is in effect only through 2005. Keep in mind too that withdrawals would be taxed at the student beneficiary's lower rate, so the tax bite may be small. In short, the new taxes may not amount to much--especially compared with more important criteria like plan performance or high fees--when it comes to choosing a 529 savings plan, in-state or out. --ILANA POLYAK