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Your tax refund makes a great CollegeAdvantage 529 fund. It’s also a great and easy saving strategy. The average 2015 federal tax refund was $2,466. By adding $2,500 a year to a 529 plan, you could cover as much as 40% of college at an Ohio public university, based on 18 years at 6% growth.
Would you like to see the math behind this number? Ohio’s 529 Savings Program offers a college savings planner to calculate how much you can save by contributing your tax refund every year. Additionally, you can use the tool to see what the estimated 529 account total could be if you deposited monthly automatic contributions, as well as increased the dollar amount or the frequency of 529 contributions. Every amount contributed, whether big or small, can help you reach your savings goal.
Keep in mind, if you deposit your tax refund or other contributions into your CollegeAdvantage 529 plan, there is a tax advantage for Ohio residents. In addition to tax-free earnings and tax-free withdrawals when used to pay qualified higher education expenses, 529 contributions of up to $2000, per beneficiary, per year, can be deducted from your state of Ohio taxable income. Deductions for contributions over $2,000 can be carried forward to future tax years until fully deducted.
The tax season is also an excellent time to assess your progress on your college savings goals, or if you haven’t yet, set your college savings goals! CollegeAdvantage offers tools to help you build a 529 plan that best fits your family’s needs. You can set or rework your college savings goal, compare long-term tax benefits, or even see the cost of waiting to save. Also, take the opportunity to review your child’s time horizon to college. If your child just started kindergarten, you have more time to save even more as well as benefit from the power of compound interest. If your child is in middle or high school, you may want to accelerate your savings. Even if your child is in college already, you can still save and take advantage of tax-free earnings (which helps you save even more) and you can maximize the Ohio tax deduction, too.
529 plans are a great alternative to student loan debt. If you haven’t started a CollegeAdvantage account, you can open an account today! If you already have an account and would like to make some changes, log in to perform account maintenance, or increase automatic deposits. CollegeAdvantage is your plan, your way.
Posted on February 15, 2017