February 4, 2015 - SACRAMENTO –Assembly Members Jim Patterson (R-Fresno), Melissa Melendez (R-Lake Elsinore), Frank Bigelow (R- O’Neals), and Bill Brough (R-Dana Point), introduced legislation Monday that would encourage early college savings by making contributions to California’s college savings plan tax deductible.
“This is California’s opportunity to help parents saving their own hard-earned dollars to keep more of that money. This will be a great tool for middle-class families who are planning for their children’s future.” Assemblyman Patterson said.
“Higher education has become just a dream, not a reality, for too many Californians,” Melendez said. “A college degree is a gateway to better employment, higher salaries, and a better quality of life. That is why the legislature should be cutting the cost of higher education anywhere it can.”
ScholarShare, California’s 529 college savings plan, was established as a way to encourage early college savings for future higher education expenses. According to the College Savings Foundation, the number of Americans saving in 529 plans has grown from two million in 2001 to seven million in 2014, and 80% of them are middle class. This year, there are over 1 million middle class students currently enrolled in college that are benefitting from a 529.
“College savings plans have helped many middle class students pay tuition costs they may have otherwise not been able to afford,” said Bigelow. “As those costs continue to soar, our bill would help offset those costs and make it easier for parents to invest in their children’s future.”
“Too many families don’t qualify for a dollar of financial aid but still can’t afford soaring costs of college. This bill provides incentive to parents to start saving towards their children’s futures. We have to relieve the burden of debt on students coming out of college,” said Brough.
Contributions to college savings plans are made with money that has already been taxed, and once they are placed into the account, any investment earnings are not federally or state taxed if used to pay for qualified higher education expenses. However, contributions to ScholarShare plans have never been tax deductible. Assembly Bill 209 would allow those who contribute to these savings plans to deduct these contributions on their state taxes.
