Hi everyone, I'm starting to think about saving for college and I've heard a lot about 529 plans. Are there any specific 529 college savings plan that are especially beneficial for California residents?
Yes, indeed! California has its own 529 plan known as the ScholarShare 529. This plan is a tax-advantaged plan designed to help individuals and families save for future college costs. Contributions grow on a tax-deferred basis, and eligible withdrawals for qualified expenses (which can include tuition, books, room and board) are both federal and California state tax-free.
If you're a California resident, this plan offers a wealth of benefits. It boasts a variety of investment options to cater for different timeframes and risk tolerances, including multi-fund, single-fund, and guaranteed options. The plan is also very easy to establish with a low initial minimum deposit requirement. Concurrently, it keeps your money fairly accessible, permitting the transfer to other eligible family members if the original beneficiary does not need it for college.
However, it's worth mentioning that California, unlike several other states, does not offer a state income tax deduction for contributions into its 529 plan. Thus, as a California resident, you could technically choose any state's plan without missing out on a state tax benefit. This gives you flexibility to shop around and find a plan with investment options and fees that best suit your needs.
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