Are 529 contributions tax deductible in California?

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hammond
Posts: 34
Joined: Mon Jul 13, 2015 2:34 am

Are 529 contributions tax deductible in California?

Post by hammond » Mon Jun 24, 2019 1:33 am

Are 529 contributions tax deductible in California? Or are they from after-tax money?

Also, I am aware of the 15k/year/parent limit. Is this for the whole year or how does it work?

Spirit Rider
Posts: 10764
Joined: Fri Mar 02, 2007 2:39 pm

Re: Are 529 contributions tax deductible in California?

Post by Spirit Rider » Mon Jun 24, 2019 5:10 am

CA along with NJ are now the only two states that do not follow federal HSA tax law.

Not only is there no state tax deduction, but there is no tax deferral. They are treated as taxable accounts. All interest, dividends and capital gains are taxable. This is complicated by the fact that there is no federal reporting (1099-INT, 1099-DIV, 1099-B, etc...) You will have to tracking this yourself.

Most CA HSA account holders use state tax efficient investments. TIPS, munis, and/or Vanguard TSM index fund/ETF. The latter because of no capital gains distributions, but they still have dividend distributions.

One more joy of living in CA.

bluebolt
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Joined: Sat Jan 14, 2017 9:01 am

Re: Are 529 contributions tax deductible in California?

Post by bluebolt » Mon Jun 24, 2019 5:11 am

A Google search for "529 deductible California" shows results that says 529 contributions are not deductible.

The $15K per person per year limit applies for the calendar/tax year. Beyond that limit, you'd likely need to fill out form 709.

stan1
Posts: 7103
Joined: Mon Oct 08, 2007 4:35 pm

Re: Are 529 contributions tax deductible in California?

Post by stan1 » Mon Jun 24, 2019 7:21 am

Spirit Rider wrote:
Mon Jun 24, 2019 5:10 am
CA along with NJ are now the only two states that do not follow federal HSA tax law.

Not only is there no state tax deduction, but there is no tax deferral. They are treated as taxable accounts. All interest, dividends and capital gains are taxable. This is complicated by the fact that there is no federal reporting (1099-INT, 1099-DIV, 1099-B, etc...) You will have to tracking this yourself.

Most CA HSA account holders use state tax efficient investments. TIPS, munis, and/or Vanguard TSM index fund/ETF. The latter because of no capital gains distributions, but they still have dividend distributions.

One more joy of living in CA.
Except the question was about 529s not HSAs ......

rkhusky
Posts: 6748
Joined: Thu Aug 18, 2011 8:09 pm

Re: Are 529 contributions tax deductible in California?

Post by rkhusky » Mon Jun 24, 2019 8:28 am

hammond wrote:
Mon Jun 24, 2019 1:33 am
Are 529 contributions tax deductible in California? Or are they from after-tax money?
As noted above, no.

Therefore, you might as well look around at other states' plans to see if any are better than CA in terms of choices, fees, ease-of-use, etc.

Spirit Rider
Posts: 10764
Joined: Fri Mar 02, 2007 2:39 pm

Re: Are 529 contributions tax deductible in California?

Post by Spirit Rider » Mon Jun 24, 2019 9:46 am

stan1 wrote:
Mon Jun 24, 2019 7:21 am
Spirit Rider wrote:
Mon Jun 24, 2019 5:10 am
CA along with NJ are now the only two states that do not follow federal HSA tax law.

Not only is there no state tax deduction, but there is no tax deferral. They are treated as taxable accounts. All interest, dividends and capital gains are taxable. This is complicated by the fact that there is no federal reporting (1099-INT, 1099-DIV, 1099-B, etc...) You will have to tracking this yourself.

Most CA HSA account holders use state tax efficient investments. TIPS, munis, and/or Vanguard TSM index fund/ETF. The latter because of no capital gains distributions, but they still have dividend distributions.

One more joy of living in CA.
Except the question was about 529s not HSAs ......
Man, that should teach me not to post when I wake up after only four hours of sleep and can't get back to sleep. So I thought; "hey let me browse Bogelheads until I get drowsy". Clearly a very bad Idea.

MMLC3
Posts: 48
Joined: Sat Jul 08, 2017 6:49 pm

Re: Are 529 contributions tax deductible in California?

Post by MMLC3 » Mon Jun 24, 2019 6:45 pm

hammond wrote:
Mon Jun 24, 2019 1:33 am
Are 529 contributions tax deductible in California? Or are they from after-tax money?

Also, I am aware of the 15k/year/parent limit. Is this for the whole year or how does it work?
No tax benefit from CA state. We went with Utah's 529 since they had low cost fund options. Have been happy so far.

Spirit Rider
Posts: 10764
Joined: Fri Mar 02, 2007 2:39 pm

Re: Are 529 contributions tax deductible in California?

Post by Spirit Rider » Mon Jun 24, 2019 8:01 pm

MMLC3 wrote:
Mon Jun 24, 2019 6:45 pm
No tax benefit from CA state. We went with Utah's 529 since they had low cost fund options. Have been happy so far.
I don't know why you wouldn't just use CA's ScholarShare529. It has the lowest costs of any nationwide available plan. Utah used to be one of the lowest cost nationwide available plans, but that hasn't been true for several years.
Last edited by Spirit Rider on Tue Jun 25, 2019 5:22 am, edited 1 time in total.

playtothebeat
Posts: 321
Joined: Thu Jan 24, 2013 12:39 pm
Location: southern california

Re: Are 529 contributions tax deductible in California?

Post by playtothebeat » Mon Jun 24, 2019 10:33 pm

Spirit Rider wrote:
Mon Jun 24, 2019 8:01 pm
MMLC3 wrote:
Mon Jun 24, 2019 6:45 pm
No tax benefit from CA state. We went with Utah's 529 since they had low cost fund options. Have been happy so far.
I don't know why you would just use CA's ScholarShare529. It has the lowest costs of any nationwide available plan. Utah used to be one of the lowest cost nationwide available plans, but that hasn't been true for several years.
That’s my experience with ScholarShare as well. Just opened an account for my kid and despite not having tax benefits, felt the investment options were attractive.

MMLC3
Posts: 48
Joined: Sat Jul 08, 2017 6:49 pm

Re: Are 529 contributions tax deductible in California?

Post by MMLC3 » Wed Jun 26, 2019 1:07 am

Spirit Rider wrote:
Mon Jun 24, 2019 8:01 pm
MMLC3 wrote:
Mon Jun 24, 2019 6:45 pm
No tax benefit from CA state. We went with Utah's 529 since they had low cost fund options. Have been happy so far.
I don't know why you wouldn't just use CA's ScholarShare529. It has the lowest costs of any nationwide available plan. Utah used to be one of the lowest cost nationwide available plans, but that hasn't been true for several years.
I think you answered for me. We opened BACK in 2010 and at that time Utah indeed was the lowest cost so we went with it. Now we’ve reached a point where we don’t need to contribute more, but just watch it grow till son heads to college.

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