TAX-FREE EARNINGS

100% of your earnings are 100% tax-free when used for college.

TAX-FREE

Pay no taxes as your funds grow — and withdrawals used for any qualified higher education expenses are exempt from both federal and Ohio income tax.

Earnings on withdrawals not used for qualified higher education expenses may be subject to federal income tax and a 10% federal tax penalty. As with all tax-related decisions, contact your tax advisor.

$2,000 STATE OF OHIO TAX DEDUCTION

CollegeAdvantage is the only 529 college savings program that allows Ohio taxpayers to deduct their contributions from Ohio taxable income. Each contributor (or married couple) can deduct up to $2,000 per beneficiary, per calendar year, with unlimited carry forward in future years.

For example, if you contributed $2,000 to accounts for each of your three children, you could deduct $6,000 from your taxable income for Ohio income taxes. Or, if you contributed $6,000 for one child in one year, you could deduct $2,000 from your Ohio taxable income in each of the next three years.

The deduction is not limited to the parents of the beneficiary. Any person contributing to a beneficiary's account is eligible to take the deduction: parents, grandparents, other relatives, even family friends. Each contributor who is an Ohio taxpayer can take the Ohio state tax deduction.

The tax deduction may be taken only for the calendar year in which the contribution is made. For example, if you contribute $2,000 in 2014, you must claim it on your 2014 tax return. Unlike IRAs, there is no grace period the following calendar year to make a contribution you wish to claim on the previous year's tax return.

Contributors other than the account owner will not receive a statement at the end of the year detailing information of account balances. Such contributors should instead maintain their own record of contributions made under the account for Ohio tax deduction purposes.

If you are not an Ohio taxpayer, before you invest, consider whether your home state offers a 529 plan that provides its taxpayers with state tax and other benefits not available through this plan.

ESTATE PLANNING BENEFITS

Parents or grandparents gifting to family members may receive an immediate benefit in reducing the donor's taxable estate. For example, you can contribute, in the first year of a 5-year period, up to $70,000 per child ($140,000 if you elect to split the gift with your spouse) gift-tax free as long as there are no other gifts made to the child in the same 5-year period.

If an account owner elects to treat a contribution as having been made over a 5-year period and dies before the end of the 5-year period, the portion of the contribution allocable to the remaining years in the 5-year period (not including the year in which the account owner died) would be included in computing the account owner's gross estate for federal estate-tax purposes. Account owners may be required to file a gift-tax return in each of the 5 years. In addition, account owners may wish to consult their tax or estate-planning counsel to ensure that they obtain the tax consequences they desire. 

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