By Kevin Luu, Co-Founder and Chief Learning Officer. Reviewed on 2026-09-30.
California and Washington families can use any state’s 529 plan, and neither state gives a state income tax deduction for contributions. California residents usually pick ScholarShare 529; Washington residents choose between WA529 Invest and the GET prepaid tuition plan. For a high-income family, the real value of a 529 is tax-free growth on money for college, which matters most in California, where investment gains are taxed as ordinary income.
This guide is for two-earner W-2 households earning $750,000 to $3 million with children under 12. All figures are for 2026 unless labelled otherwise.
Why the state you live in matters less than you think
Many states give residents a deduction for contributing to the home-state plan, which is why so much 529 content is about state deductions. California and Washington do not. California allows no deduction for 529 contributions (a 2025 bill to create one, SB 529, died in the Legislature, per the bill status page). Washington has no individual income tax in 2026 (WA DOR), so there is nothing to deduct against. There is also no federal deduction for 529 contributions (IRS Publication 970).
So judge a plan on fees, the investment menu and withdrawal rules. Many families start with the in-state plan (ScholarShare in California, WA529 Invest or GET in Washington), and since neither state offers a deduction, the choice comes down to cost and investment options rather than a state tax break.
Where the state does matter is on the way out. Qualified withdrawals for college are free of federal and California income tax. California, however, does not follow two newer federal rules, and that changes how a California family should use the account.
California: ScholarShare 529 and the two federal rules California does not follow
ScholarShare 529 is California’s official plan. Accounts can be opened with any amount, and there is an overall maximum balance of $529,000 across all ScholarShare accounts for one beneficiary; contributions above that are returned (ScholarShare FAQ). Earnings grow free of California tax, and withdrawals used for college tuition, fees, books and qualifying room and board are tax-free at both levels.
The two rules California does not follow:
- K-12 expenses. Federal law lets you use a 529 for private elementary and secondary school. For 2026 the federal cap rises from $10,000 to $20,000 per student per year, and the list of covered K-12 costs was widened to include curriculum, books, online materials and certain tutoring (IRC §529(c)(7) and (e)(3), as amended by P.L. 119-21). California does not conform: the earnings portion of a K-12 withdrawal is taxable for California and is also subject to California’s additional 2.5% tax (FTB 2025 Form 540 booklet; FTB 3805P).
- 529-to-Roth IRA rollover. Federal law allows a limited rollover of leftover 529 money into the beneficiary’s Roth IRA. California does not conform (R&TC §17140.3(f)), and the rollover is taxable for California. ScholarShare describes it as a non-qualified withdrawal for California residents: the earnings portion is subject to California income tax plus the additional 2.5% tax (ScholarShare FAQ).
Neither rule makes a 529 a bad idea for a California family. They mean the account works best as what it was built for: paying for college.
Washington: WA529 Invest or GET prepaid units
Washington offers two 529 programs, both open year-round (WA529, GET vs WA529 Invest).
WA529 Invest works like ScholarShare. You choose an enrollment-year (age-based) portfolio or a static portfolio, and the balance rises and falls with the markets. Accounts can be opened with any amount. The maximum balance is $500,000 per beneficiary, counting all Washington 529 accounts for that child, including GET (WA529 Invest FAQ).
GET (the GET Prepaid Tuition Plan) works differently. You buy units, and 100 units equal one year of resident undergraduate tuition and state-mandated fees at Washington’s highest-priced public university. For 2026-27 that year of tuition is $13,210, so one unit pays out $132.10 (GET payout over time). The 2026-27 purchase price is $123.76 per unit, a student can hold at most 800 units, and units must be held at least two years before use (GET enrollment form, 2026-27).
If your child goes out of state or to a private college, GET can still be used at nearly any public or private college or university in the U.S. The catch is in the unit value: it tracks Washington public tuition, not the price of the school your child picks. At a private university costing several times Washington tuition, GET covers a slice and the rest comes from other savings. The state backs GET so that unit value keeps pace with tuition at Washington’s highest-priced public university, but its enrollment form also notes that GET units can lose value if in-state tuition falls, and the state does not promise a gain on what you paid.
For most families at this income level, GET is a hedge against Washington tuition inflation, not a full college plan. WA529 Invest usually carries the bulk of the savings.
One Washington caution for high earners: Washington has enacted a 9.9% income tax on AGI over $1,000,000 starting January 1, 2028 (WA DOR). How it will treat 529 withdrawals is pending DOR guidance.
California and Washington side by side
| Rule (2026) | California | Washington |
|---|---|---|
| State deduction for contributions | None | None (no individual income tax in 2026) |
| In-state plan options | ScholarShare 529 | WA529 Invest (market-based) and GET (prepaid units) |
| Maximum balance per beneficiary | $529,000 across ScholarShare accounts | $500,000 across all WA 529 accounts, GET included |
| Growth and college withdrawals | Free of federal and CA tax | Free of federal tax; no state tax in 2026 |
| Private K-12 withdrawals (federal cap $20,000 per student) | Earnings taxed by CA plus 2.5% additional CA tax | Federal rules apply; no state tax in 2026 |
| 529-to-Roth IRA rollover | Included in CA taxable income | Federal rules apply |
| Tax on the same growth in a taxable brokerage account | Up to 13.3% (2025 rates), with no lower rate for capital gains | 7% capital gains tax above the annual standard deduction, 9.9% on taxable gains over $1,000,000 |
That last row is why a 529 is worth more to a California family. California taxes capital gains as ordinary income, up to 13.3% (FTB). Washington taxes long-term capital gains at 7% above an annual standard deduction and 9.9% on taxable gains over $1,000,000 (WA DOR), so many Washington families pay only the federal tax on modest gains.
How much you can put in: no annual cap, but gift rules apply
There is no annual 529 contribution limit. The real limits are the plan’s maximum balance and the federal gift tax rules. Every contribution is a gift from you to your child. For 2026 each parent can give $19,000 per child without touching their lifetime exemption, so a married couple can put in $38,000 per child per year (Rev. Proc. 2025-32). Amounts above that simply use part of each parent’s $15,000,000 lifetime exemption for 2026 and require a gift tax return (Form 709). For families in this income range, the gift tax itself is rarely owed.
You do not report 529 contributions on your Form 1040. You may need Form 709 if you give more than the annual exclusion or make the five-year election described next. Withdrawals are reported to the beneficiary or owner on Form 1099-Q.
Superfunding: five years of gifts at once from an RSU vest or bonus
A special election lets you treat one large 529 contribution as if it were spread over five years. For 2026 that means up to $95,000 per parent per child (5 x $19,000), or $190,000 per child for a married couple who split gifts. You make the election on Form 709 (Form 709 instructions). If you superfund, any other gifts to that child during the five years count against the annual exclusion you already used.
For a family whose income arrives in lumps (an RSU vest, an annual bonus, an ESPP sale), superfunding matches cash flow better than monthly deposits. The money also starts compounding sooner. The tradeoff is concentration of timing: you invest a large amount on one date, and you give up flexibility over that cash for college.
Worked example: a Bay Area family with a 2-year-old and a 6-year-old
Assumptions (illustrative, not a forecast):
- Married filing jointly in California, household W-2 income of $1.1 million including RSUs, with California taxable income above $1,000,000.
- Two children, ages 2 and 6. College starts at 18, so 16 and 12 years of growth.
- 6% average annual return, the same in the 529 and in a taxable brokerage account (monthly deposits compound at the monthly equivalent of 6% a year). Real returns will differ, and some years will be negative.
- If the same money sat in a taxable account and the gains were taxed once at the end: 20% federal long-term capital gains rate plus the 3.8% Net Investment Income Tax (IRS), plus 12.3% California: the 11.3% bracket for joint taxable income between $891,542 and $1,485,906 (2025, the latest schedule the FTB has published) plus the 1% Behavioral Health Services Tax on taxable income over $1,000,000 (FTB 2025 rate schedules). Combined 36.1%. This is simplified: it ignores tax on dividends along the way, which would make the taxable account look worse.
The parents compare two paths for each child: $1,500 a month until 18, or a single $190,000 superfunded gift now from an RSU vest.
| Child and path | Total contributed | Projected value at 18 | Growth (tax-free if used for college) | Tax on that growth in a CA taxable account (36.1%) |
|---|---|---|---|---|
| Age 2, $1,500/month for 16 years | $288,000 | $474,680 | $186,680 | $67,391 |
| Age 2, $190,000 superfunded now | $190,000 | $482,667 | $292,667 | $105,653 |
| Age 6, $1,500/month for 12 years | $216,000 | $311,922 | $95,922 | $34,628 |
| Age 6, $190,000 superfunded now | $190,000 | $382,317 | $192,317 | $69,427 |
What the table shows:
- For the 2-year-old, superfunding $190,000 now reaches a slightly higher balance than $288,000 of monthly deposits, because the money has 16 years to compound. Both stay under ScholarShare’s $529,000 balance cap.
- For the 6-year-old, time is shorter, so the head start matters less in dollars but still produces the larger balance.
- The tax value of the 529 is the last column: tens of thousands of dollars per child that would otherwise go to federal and California tax, as long as the money is spent on college.
A Washington family with the same numbers would save the federal 23.8% on the growth, and the 7% Washington capital gains tax only if its total gains in the year of sale would exceed the state’s annual threshold. The 529 still helps; the margin is smaller. From 2028, Washington’s new 9.9% income tax on AGI over $1,000,000 could change that math for a household at this income, depending on DOR guidance.
One more point for this family: at $1.1 million of income, need-based federal aid is unlikely to be a factor, so FAFSA treatment of the 529 should not drive the decision. Merit aid and the specific colleges your children apply to matter far more.
Using a 529 for private school (K-12) in California
Suppose the same family pays $30,000 a year for private elementary school and withdraws $20,000 a year from the 529 for it. Federally, that $20,000 is tax-free for 2026. For California, the earnings portion is taxable. If $6,000 of the withdrawal is earnings, California taxes it at the family’s marginal rate (12.3%, the 2025 11.3% bracket plus the 1% Behavioral Health Services Tax, $738) and adds the 2.5% additional tax ($150), for about $888 in California tax that year.
That cost is not large. The bigger cost is what the money would have become. Pulling $20,000 a year out in elementary school removes the dollars with the most years left to compound tax-free. For many California families at this income, paying K-12 tuition from cash flow and leaving the 529 for college is the stronger use of the account. Washington families face only the federal rules for now, so K-12 withdrawals are simpler for them.
Leftover money: the 529-to-Roth rollover and changing beneficiaries
Parents who superfund early often worry about overfunding. There are three exits.
- Change the beneficiary to a sibling, a cousin, a future grandchild or yourself. A change to another family member of the beneficiary is not a taxable distribution (Pub 970). This is the most common answer for families with more than one child. If you later want to move ownership of the account, see our guide on transferring 529 ownership.
- Roll some into the child’s Roth IRA. Federal law allows up to $35,000 over the beneficiary’s lifetime, by direct trustee-to-trustee transfer, from a 529 that has been open for more than 15 years. Contributions made in the last five years (and their earnings) are not eligible, and each year’s rollover counts against the Roth IRA annual limit, which is $7,500 for 2026 or the child’s taxable compensation for the year if less, so the child generally needs earned income at least equal to that year’s rollover (IRS Publication 590-A; IRC §529(c)(3)(E); Notice 2025-67). At that limit, reaching $35,000 takes at least five years. California taxes the rollover as income, as noted above. The 15-year clock is one more reason to open the account while your child is young.
- Take a non-qualified withdrawal. The earnings are taxed as income and generally face an additional 10% federal tax; California adds its 2.5% additional tax. Contributions come back without tax. This is the least efficient exit, but it is rarely a disaster.
529, UTMA or taxable account: which money goes where
A 529 is the right home for money you expect to spend on education. It is the wrong home for money you want your child to have for a first home, a business or anything else, because non-college use gives back part of the tax benefit. Money meant for general use belongs in a taxable account in the parents’ names, or in a custodial UTMA account, which becomes the child’s at an age between 18 and 25 depending on the state and how the gift was set up, and whose income can be hit by the kiddie tax above $2,700 of unearned income for 2026. Our guide to UTMA withdrawal tax rules covers that side.
What to decide this year and what to document
The decisions for 2026:
- Pick the plan. ScholarShare in California; WA529 Invest, with GET as an optional tuition hedge, in Washington.
- Choose monthly, superfunded, or both. If a large RSU vest or bonus is coming, decide whether a five-year election fits. Add a note to your tax preparer so Form 709 gets filed.
- Set a college target per child and check it against the plan’s balance cap.
- In California, decide now whether the 529 will pay for K-12. For many families at this income, keeping it for college works out better, for the reasons above.
- Name a successor account owner so someone you chose controls the account if something happens to you.
Then write down why. A 529 will run for 12 to 16 years, and by the time your children use it they will not remember the RSU vest that funded it or why you chose growth over the prepaid plan. A one-page note, filed where they can read it at 18, turns the account into a lesson about planning ahead, paying for what matters, and the difference between spending and investing. That is the core of Age Five Wealth Education and the FamilyKnowledge® Library. As Kevin Luu, Co-Founder of Bright Advisers, puts it: “Your kids don’t need to inherit your portfolio. They need to inherit your decision-making process.”
Common questions
Is a 529 plan tax-deductible in California?
No. California gives no state income tax deduction for 529 contributions for 2026, whether you use ScholarShare or another state’s plan. A 2025 bill to add one did not pass. There is also no federal deduction. The benefit comes later: growth is free of federal and California tax when the money is spent on qualified college costs.
Can Washington families use GET for a private or out-of-state college?
Yes. GET can be used at nearly any public or private college or university in the U.S. Each unit pays out at the GET payout value, which tracks Washington public university tuition ($132.10 per unit for 2026-27). At a more expensive private or out-of-state school, the units cover part of the bill and the family pays the rest from other savings, often a WA529 Invest account.
Should grandparents open their own 529 or give to ours?
Either works. Grandparents can use their own $19,000 annual exclusion for 2026 (or superfund up to $95,000 each) toward the same child. The balance cap counts every account for that beneficiary in the plan, so coordinate totals. Owning the account themselves keeps control with them; giving to the parents’ account keeps the plan in one place.
Next step
If your family has RSUs, a bonus schedule and two or more children, the timing of 529 funding usually ties into your broader tax planning for the year. Our Tax & Wealth Assessment maps where education savings fit alongside your other accounts and what to document for your children.
This page is general education, not individual tax or investment advice, and the right move depends on your family’s full picture.