Personal Income Tax Law: qualified tuition program.

Plain English Breakdown

The bill summary does not provide specific details about the requirements for including detailed goals and performance measures in bills creating new tax expenditures, so this claim was removed.

California Scholarshare Program Tax Changes

AB-2444 aligns California's personal income tax laws with federal rules for excluding certain distributions from the Scholarshare program and allows deductions for contributions to these accounts.

What This Bill Does

• Aligns state law so that money taken out of a Scholarshare account after December 31, 2023, and transferred directly into a Roth IRA is not taxed in California starting January 1, 2026.
• Allows people who contribute to a Scholarshare account to deduct those contributions from their taxes when calculating adjusted gross income starting January 1, 2027.

Who It Names or Affects

• People who use the Scholarshare College Savings Trust program
• Taxpayers contributing money to a Scholarshare account

Terms To Know

Scholarshare trust

A college savings plan managed by the Scholarshare Investment Board that helps pay for postsecondary education costs.

Roth IRA

An individual retirement account where contributions are made with after-tax dollars and withdrawals in retirement are tax-free.

Limits and Unknowns

• The bill only applies to taxable years starting on or before January 1, 2031.
• It is not clear how many people will benefit from the new deductions for contributions to Scholarshare accounts.

Official Summary Text

AB 2444, as amended, Michelle Rodriguez.
Personal Income Tax Law: qualified tuition program.
The Personal Income Tax Law, in conformity with federal income tax law, generally defines “gross income” as income from whatever source derived, except as specifically excluded, and provides various exclusions from gross income. Existing law, known as the Golden State Scholarshare Trust Act, establishes the Golden State Scholarshare College Savings Trust (Scholarshare trust), under the administration of the Scholarshare Investment Board, to provide financial aid for postsecondary education costs of participating students. Existing state and federal law generally includes in gross income distributions from a qualified tuition program, as defined to include the Scholarshare trust, except as provided.
Existing federal law, the Consolidated Appropriations Act, 2023, excludes from gross income, for federal income tax purposes, distributions from a
qualified tuition program that are made after December 31, 2023, and are paid in a direct trustee-to-trustee transfer to a Roth IRA, as described.
The Personal Income Tax Law generally conforms to federal income tax law relating to qualified state tuition programs, except as specified. Among those exceptions, existing state law does not conform to the above-described exclusion for distributions from a qualified tuition program.
This bill would instead conform to that federal exclusion for taxable years beginning on or after January 1, 2026, and before January 1,
2030.
2031.
The Personal Income Tax Law, in modified conformity with federal
income tax laws, allows various deductions from gross income in calculating adjusted gross income.
This bill would, for taxable years beginning on or after January 1,
2026,
2027, and before January 1, 2032,
would allow a deduction in determining adjusted gross income for contributions to a Scholarshare account by a qualified taxpayer, as specified.
Existing law requires a bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives the tax expenditure will achieve, detailed performance indicators, and data collection requirements.
This bill would include additional information required for any bill authorizing a new tax expenditure.
This bill would take effect immediately as a tax levy.

Current Bill Text

Download Bill PDF