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529 Tips

Spring Clean Your Ohio 529 Plan

Ah springtime! The weather improves, flowers start to bloom, and the tax season is almost over! As the outside world warms up, your thoughts might turn to spring cleaning. As you start your improvement projects around and outside the house, take the time to review your children’s 529 account as well. Ohio’s 529 Plan, CollegeAdvantage, can help.

If you now have more than one child

If you opened a college savings plan when your first child was born but haven’t yet for your newer arrivals, consider opening up their own individual 529 plans. Separate 529 plans for each child can maximize the tax benefits of saving for college in a 529 plan. These advantages include tax-free contributions and earnings, which means all investment is growth is yours to use, and tax-free withdrawals when used to pay qualified higher education expenses.

Additionally, Ohio residents can deduct the Ohio’s 529 Plan contributions from their Ohio taxable income, up to $​4,000 per year, per beneficiary, with unlimited carry forward. So if you are an Ohioan with three Ohio 529 plans for your three children, you can maximize this tax benefit up to $​12,000 per year. Because of the unlimited carry forward for the state income tax deduction, it means that $​4,000 per year is not a contribution cap. If you have one 529 account and you’ve contributed $12,000, you will subtract $4,000 per year, per beneficiary, from your Ohio taxable income until all the 529 contributions have been deducted.

Age-based saving strategies

Has it been a while since you’ve opened your CollegeAdvantage account? It might be time to check out these savings strategies based on your children’s ages, especially if you’re not in a ready-made age-based portfolio. With a ready-made age-based investment option, the equity in a portfolio will automatically decrease as your child grows older; this reduces risk in the portfolio the closer the time comes to use the account to cover higher education costs.

If you still have a baby or toddler, you’ve done a great job by already starting to save for their future higher education. When loved ones ask what gifts you’d like for your child, ask for the gift of a college education and share how they can add to your child’s account through Ugift. During kindergarten through elementary school, shift your disappearing expenses like diapers and day care costs to fund your child’s 529 plan. Those dollars you’ve prioritized for pre-K education can then support your child’s higher education. When your child enters middle school and high school, you may want increase your contributions to still maximize the power of compound interest to grow the account. Even if your child is about to start or has even started college, the benefits of tax-free earnings, tax-free withdrawals, and the state tax deduction for Ohioans can still build up the 529 account.

Tools and calculators

Curious if you’re on track with your college savings goals? CollegeAdvantage has tools and calculators to see how your 529 savings are adding up. With the college savings planner, you can receive an estimated monthly savings amount needed to reach your savings objectives. Change the planned contribution amount in this tool to see how setting aside a little more money can really add up. If you still considering opening a 529 plan to save for higher education costs, the tax benefit tool can show you how the tax benefits of a 529 plan can build the account when compared to a taxable savings account. The cost of waiting tool can ascertain how much more you may need to save to reach your college savings goals if you don’t start soon. Lastly, your asset allocation strategy is one of the most important decisions you’ll make. If you aren’t sure what level of risk you’re willing to take in your investment strategy, the risk tolerance questionnaire can determine your comfort level.

Tax refund can fund your 529

As mentioned earlier, tax season is almost over. If you’re receiving a tax refund, it will make a great contribution to your CollegeAdvantage account. The average 2016 federal tax refund was $2,697. By adding $2,700 a year to your Ohio 529 Plan over 18 years, you could cover over 40% of qualified college costs at an Ohio four-year public university. Like to see how much your yearly tax refund can grow your 529 account? Then use the college ​savings planner to calculate ​the savings. Every contributions, whether big or small, can really add up.

As you’re enjoying the better weather, make sure to include your Ohio’s 529 Plan in your spring cleaning. Whether it’s performing account maintenance, starting automatic contributions to your 529 account, or updating account information, it’s great time to refocus on your college savings goals and your 529 account. An investment in a 529 plan is an investment in your child. Every dollar saved today is a dollar that doesn’t have to be borrowed which makes Ohio’s 529 college savings plan an excellent alternative to student loan debt. Ohio’s 529 Plan, CollegeAdvantage, is your plan, your way.

Posted on March 27, 2018

Ohio Tuition Trust Authority

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