If you’re a Missouri parent trying to save money for college, you should be aware of an important tax-law change that took effect last month. Accounting firm RubinBrown reminds us that, beginning this year, Missouri taxpayers can take a deduction for contributions to any state’s qualified college-savings plan. Previously, you only got a state tax deduction for putting money into the Missouri Saving for Tuition plan. According to RubinBrown:

Missouri joins Arizona, Kansas, Maine and Pennsylvania in making tax benefits for 529 plan contributions available to its residents regardless of whether or not they use an in-state or out-of-state plan.

First, the obvious question: Should you now be socking away your future tuition payments in a non-Missouri plan? If you already have a MOST account, probably not. Missouri’s is a decent plan if you stick to the plain-vanilla, index-based investment options. If you’re just starting to save for college, though, you might look at a plan like Illinois’ Bright Start instead. It is superior to MOST in some ways, including its lower fees. And it tops Morningstar’s list of the best 529 college-savings plans.  (”529″ refers to a section of federal tax law, not to the number of plans.)

Now for a little political history: the brokerage industry lobbied heavily for this change for at least five years. (Here’s the law that finally passed this spring.) When I first wrote about the issue in 2003, Edward Jones and the Securities Industry Association were leading the charge. Edward Jones wanted its brokers to sell savings plans sponsored by its “preferred” mutual fund families, such as Putnam and American Funds, but those plans didn’t qualify for the Missouri tax deduction.

I opposed the change at the time. During 2003 and 2004, I wrote columns saying that Missouri shouldn’t encourage its residents to invest in high-cost, inferior fund products offered by several states. Now? Many states (including Illinois) have improved their plans dramatically, so there aren’t as many bad products to worry about. Problems still exist, however. Morningstar says of one Ohio offering:

We are increasingly concerned about Ohio’s advisor-sold Putnam CollegeAdvantage. The funds have had bad performance, and we’ve seen troublingly high turnover among managers, analysts, and executives at Putnam.

Putnam, by the way, is still on Edward Jones’ list of revenue-sharing partners.

Bottom line? This change was made for the benefit of brokers. It will eliminate an inconvenience for people who move into Missouri; they can keep contributing to their old state’s plan and take full advantage of the Missouri tax break. But if your broker pitches an unfamiliar, out-of-state plan, be sure to ask a lot of questions.