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1. No matter which state's plan you use, earnings will accumulate free of federal and California state income taxes. You will not pay taxes on your 529 money until you withdraw the money from the plan.

2. California law exempts qualified distributions from California and non-California 529 plans via conformity to the federal tax exclusion. (http://www.savingforcollege.com/529_plan_details/?page=plan_...)


Thanks for correcting me. As a Texas resident I misunderstood this aspect of 529's.

So I guess the take-home message is that Clark Howard's recommendation (re: California Scholarshare) is flat out wrong, and a California resident should shop around for the best plan offered in the 50 states?
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