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Saving for college is a forward-looking action plan. No matter the age of a child, it is never too early and it is never too late to start saving for them.
CollegeAdvantage, Ohio’s 529 Savings Program, helps families across the nation save money for their children’s future college costs in a tax-advantaged manner. What are the benefits? First, all contributions and earnings grow tax-free in a 529 plan. Second, when a 529 account withdrawal is requested to cover qualified higher education expenses, the amount taken out will be tax-free. Third, a CollegeAdvantage account owner who is an Ohio resident can deduct 529 contributions from their Ohio taxable income, up to $4,000 per year, per beneficiary, with unlimited carry forward. This means that $4,000 per year is not a contribution cap. The taxpayer can continue to subtract $4,000 per year from their Ohio taxable income until all the 529 contributions have been deducted.
A 529 account is an excellent alternative to student loan debt. Saving for college now, while potentially challenging initially to include in a budget, is far cheaper than paying off students loans later in life. There are steps to take once a 529 account has been open that can simplify setting aside college savings.
A straightforward way to save is to set up automatic deposits to be placed in an Ohio 529 College Savings Account and then forget about it. Many account owners find it’s easiest to have contributions automatically transferred to the 529 account before the funds are unintentionally used for other expenses. Electronically transferred 529 contributions can be scheduled to match paycheck deposits or to another monthly contribution schedule.
Some employers also offer payroll deduction, where a portion of a paycheck can be deposited directly into a CollegeAdvantage Direct 529 account. Direct deposit of payroll contributions makes it easy to save regularly to meet college-saving goals. The 529 account owner can login to their account and establish payroll deduction through direct deposit or complete and mail a payroll deduction form. A side note: A FifthThird Certificate of Deposit (CD), which requires a $500 minimum contribution to open, is not available for purchase through automatic recurring contributions or payroll deduction.
Additionally, another way to boost a 529 college savings plan is to contribute federal and state tax returns, pay raises, or bonuses to the 529 account. The average tax return is $2,466. Adding $2,500 a year to a 529 plan could cover as much as 40% of college at an Ohio public university, based on 18 years at 6% growth.
CollegeAdvantage is your plan, your way. By saving regularly through automatic contributions or payroll deduction, even small amounts add up to big savings over time. Every amount contributed to a 529 will grow tax-free and can be withdrawn tax-free. For Ohio taxpayers, CollegeAdvantage 529 plan contributions can be deducted from their state taxable income, up to $4,000 per year, per beneficiary. Keep moving forward to reach your college savings goal for your child.
Ready to start with Ohio’s 529 Savings Program? It’s easy to open an account here. Already have an account and want to make some changes? Log in to a 529 account to update information, perform account maintenance, or increase automatic deposits or payroll deduction contribution amount.
Posted on February 1, 2017