Section 529 plans offer one of the most popular ways to save for college. (“529” refers to the section of IRS code that established these plans.) Anyone can set up a 529 plan and name any legal U.S. resident as the beneficiary, including children, grandchildren—or even themselves. Savings grow tax free, contributions and earnings are exempt from federal taxes when they are used for a qualified higher education expenses. Each state has its own plan. For more information on California’s plan, call (800) 544-5248 or visit Scholarshare. Fees and performance for these plans vary widely, so it’s crucial you do your homework when choosing a plan. Fortunately, there are websites that can help: www.savingforcollege.com ranks top performing plans and publishes an annual fee study.
You may qualify for tax deductions or tax credits for education expenses. This IRS webpage explains these benefits in detail here.