A new school year is upon us. If you're not already, now might be a good time to think about joining a 529 Plan for tax-efficient education savings. California does not offer a state income tax benefit for contributions to an in-state 529 plan but there are still compelling reasons to participate in a 529 Plan. Also, this makes 529 Plans from other states attractive to California residents as well.
California residents have access to the ScholarShare 529 plan, which is highly regarded. Here are some details about it and a few other top-rated plans that you might consider:
ScholarShare 529 (California)
- Tax Benefits: No state tax deduction, but earnings grow tax-free.
- Fees: Low fees, with an expense ratio ranging from 0.08% to 0.57%.
- Investment Options: Offers age-based, multi-fund, individual-fund, and principal-protection portfolios.
- Contribution Limits: High contribution limit of $529,000 per beneficiary.
Vanguard 529 Plan (Nevada)
- Tax Benefits: No state tax deduction for California residents, but earnings grow tax-free.
- Fees: Low fees, with an expense ratio of around 0.14%.
- Investment Options: Includes age-based, static, and individual fund options.
- Contribution Limits: High contribution limit of $500,000 per beneficiary.
my529 (Utah)
- Tax Benefits: No state tax deduction for California residents, but earnings grow tax-free.
- Fees: Low fees, with an expense ratio of around 0.16%.
- Investment Options: Offers age-based, static, and customized investment options.
- Contribution Limits: High contribution limit of $510,000 per beneficiary.
T. Rowe Price College Savings Plan (Alaska)
- Tax Benefits: No state tax deduction for California residents, but earnings grow tax-free.
- Fees: Low fees, with an expense ratio of around 0.22%.
- Investment Options: Includes age-based, static, and individual fund options.
- Contribution Limits: High contribution limit of $475,000 per beneficiary.
Since California does not offer a state income tax benefit for contributions to an in-state 529 plan, Californians have the flexibility to choose any state’s plan without losing out on tax benefits. When selecting a plan, consider factors like fees, investment options, and contribution limits to find the best fit for your needs.