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529 Tips

Save In A 529 Plan While Your Child Is In College

Unless your child is graduating from college this spring,  it’s never too late to save for college. Even if your child is currently attending a two-year, four-year, graduate, vocational or professional school, you can still save in a 529 plan. Why? The tax benefits are still available to grow the college savings account with Ohio’s 529 Plan, CollegeAdvantage.

Tax advantages of still saving in the 529 plan

First, you can still take advantage of tax-free earnings. This means all the investment growth, even short-term growth, is yours to use to cover college costs.

Second, withdrawals to cover qualified higher education expenses are tax-free at federally accredited programs. These expenditures include tuition; room and board when the beneficiary is enrolled at least half-time; mandatory fees; computer equipment and related technology as well as internet services; books, supplies and equipment related to enrollment and classes; and certain expenses for a special-needs student. Room and board costs can also include rent for off-campus residency and groceries (non-taxable items only), provided these costs are equal or less than the same room and board allowances from the accredited school. As is the case with all 529 college savings plans, the burden of proof for tax purposes for qualified expenses and withdrawals is on the account owner. Retain all documentation of your beneficiary's room and board and other 529-qualifed expenses.

Third, an Ohio resident who saves in Ohio’s 529 Plan, CollegeAdvantage, can deduct their contributions from their taxable state income. Effective Jan. 1, the deduction amount is $4,000 per year, per beneficiary, with unlimited carry forward. This means that $4,000 is not a contribution cap. If an Ohio taxpayer contributes more than $4,000 in one year, they can continue to subtract $4,000 per year, per beneficiary, from their State of Ohio taxable income until all Ohio 529 Plan contributions have been deducted.

Contributions must remain in account for set period of time

However, the funds you contribute to your 529 plan must remain in the account for at least seven business days before they can be used to cover college costs. This allows all the funds to clear any regulatory concerns.

How to make withdrawals for post high-school expenses

If you’re still saving in your child’s 529 plan while they are in college, eventually you will need to draw on those funds to cover their higher education expenses.  When it’s time to make a withdrawal to pay college costs, first make sure your account information is current.

Account updates and two-factor authentication

Ohio’s 529 Plan applies two-factor authentication to all 529 accounts, which enhances the security of online access. This process protects valuable account information by allowing financial institutions to double-check their online account users’ identities.

As a CollegeAdvantage Direct 529 account owner, you will need to take two steps to verify your identity. First, log in  as normal with the account number and password from a private computer or other secure device. Then you will account owner will then select how to receive the PIN (Personal Identification Number) – by text, phone, or calling CollegeAdvantage’s Customer Service Department. Upon receipt of the PIN, you will have five minutes to enter the code. Once the PIN has been entered from your computer or other secure device, there’s an option to mark the device as trusted. In order to keep the account secure, this process will be repeated during the life of the account.

While logged into the 529 account, update your bank’s information if needed. For security purposes, no withdrawals will be processed unless your bank information has been on file for at least 15 business days. This is a one-time waiting period when you change your banking information. To add your current bank account details, go to the “Asset Management” menu to add your bank information in the “Manage Banks” section.

Online withdrawals and payments

Online withdrawal requests followed by online tuition payments to the school are the fastest way to move money from your CollegeAdvantage 529 account to an eligible education institution. While logged into the college savings plan, request that your withdrawal be sent directly to the post-secondary education institute, your bank account, or to the account beneficiary’s bank account. Withdrawals requested before 4 p.m. EST on business days will be processed in three business days. If you opted to have the withdrawn funds to be sent to your, or the beneficiary’s bank account, it may take additional time for the bank to show the 529 withdrawal as deposited.

If you elected for the withdrawal to go directly to the school, make sure to provide the correct student ID number and the correct school address on the withdrawal form. CollegeAdvantage does not provide school addresses. Then use the college’s online portal to pay your child’s college costs. Processing times will vary by school; ask the bursar’s office what a good time period would be to start the withdrawal process so you can avoid late penalties.

You can also opt to have the withdrawal sent electronically to your bank account. From the date of your request, you can expect the funds to be at your bank within three to five business days. Use the school’s online portal to pay the higher-education expenses from your bank account. Most schools have their own electronic tuition payment process as well as other traditional methods. Check your school’s bursar office for details. Processing times will vary by school.

Ohio’s 529 Plan can also send the online withdrawal directly to the school via a paper check by U.S. mail. Depending on the U.S. Postal Service’s delivery schedule as well as the school’s paper check processing procedures, this may cause delays in the payment. For the paper check, you must provide the correct school address, your student’s school ID number so the school knows to whom to credit the payment. You should allow at least an additional 10 business days after the date of your online withdrawal request for the check to arrive at the school. It will also take the school additional time to apply the payment to your student’s expenses.

No matter if your child is heading to college this fall or is currently in college, continue to save in your 529 plan to maximize all its tax advantages. CollegeAdvantage is your plan, your way.

Posted on March 6, 2018

Ohio Tuition Trust Authority

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