California 529 Plan: What College Savers Should Know | BestColleges (2024)

The Golden State has saved over $13.8 billion for college through the California 529. Read about the plan's rules for participation.

529 plans help people save for college for themselves or their children. They typically come with tax benefits, like a deduction or credit.

According to the Federal Reserve, California held about $13.8 billion in 529 plans in September 2023.^[1] And, you don't need to be a state resident to participate.

Keep reading to learn about California's 529 and state tax deduction rules.

California's 529 Plans

California has one 529 plan. But this program has different portfolio types to invest in.

Savers can invest in a portfolio based on their beneficiary's enrollment year or their risk tolerance.

ScholarShare 529

• Requires State Residency? No
• K-12 Expenses Eligible? No
• Fees: 0-0.43%
• Performance Notes:
  • The 2024-2025 Passive Enrollment Year Investment Portfolio has had average annual returns of 1.96% since inception.
  • The lowest-risk investment portfolio — the guaranteed portfolio option — has gained 1.43% in returns since its inception.

California 529 Plan Pros and Cons

The facts below come from the College Savings Plan Network,^[2] the leading source for information about 529 plans in every state.

Pros

• California has one of the highest limits in the country for how much money you can save in a 529 plan. Fittingly, you can contribute up to $529,000 in total to California's 529 plan.
• You can use the California 529 to pay for college expenses in any state.
• Qualified withdrawals from a 529 plan are tax-exempt.
• In California's 529 plan, you can select to invest your funds primarily in environmental, social, and governance (ESG) portfolios — funds that especially consider certain ESG needs.

Cons

• California does not allow residents to deduct 529 plan contributions on their taxes.
• You can't use the California 529 plan to pay for K-12 education expenses.