Simple Cost Sharing Agreement With 529 In California
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FAQ
State tax benefits for California residents: While California does not provide a state income tax deduction for contributions to a 529 plan, the earnings within the plan still grow tax-deferred at the federal level. This tax-deferred growth can be beneficial when used for qualified education expenses.
To open a 529 plan account, visit the 529 plan's website to download a PDF account application or to apply online. Printed account applications can be submitted by mail.
Generally speaking, funds in a UTMA are seen as a child's assets, while 529 assets are seen as the parents'. The FAFSA weighs the child's assets more heavily against you. That means that saving in a UTMA instead of a 529 could result in your child getting less financial aid.
If an investor opened a tax-deferred 529 account with an initial investment of $2,500 and contributed $100 every month for 18 years, the account could be worth over $6,300 more than with similar contributions into a taxable account.
California's college savings plan is called ScholarShare 529. It's an investment account that gives you tax advantages when you use it for qualified higher education expenses. By linking your CalKIDS account with a new or existing ScholarShare 529 account, you can watch your college savings grow in one place.
Lastly, although the IRS can audit a student's return to verify that 529 plan earnings distributions were properly excluded from income, they don't seem to do this very often.
If you receive a letter or are audited by the IRS, it may be because the IRS did not receive a Form 1098-T, Tuition Statement PDF, verifying the student's enrollment or we need additional information to support the amounts of qualified expenses you reported on Form 8863 PDF.
If you took a 529 savings plan withdrawal last year, you will receive IRS Form 1099-Q. It reports all the payments that have been made from the 529 savings plan, regardless of how they were spent.
