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Nov. 11, 2018, is Veterans Day when we honor all U.S. military veterans. This year also marks the 100th anniversary of the end of World War I.
Currently, there are over 20 million military veterans in the United States and nearly two million men and women actively serving in our active duty, National Guard, and reserve armed forces. Each one took an oath to “support and defend the Constitution of the United States against all enemies foreign and domestic.” Among the freedoms that this oath and this commitment to service protects is the freedom to choose a path of education, training, or certification that ensures a rewarding career and economic prosperity.
U.S. Department of Veterans Affairs administers the Post-9/11 GI Bill. This federal assistance includes 36 months of education benefits: full in-state public school tuition and fees (there is a national maximum rate cap for tuition and fees for attending a private college), monthly housing allowance, and an annual books and supplies stipend.
If you choose not to use these benefits for your own continuing education, you can transfer their unused GI bill benefits to your dependents — spouses and children. The education benefits can also be divided among the dependents, to pay for their college or vocational training.
529 plans work with GI Bill benefits
What are 529 plans? These specialized accounts are a tax-advantaged way to save for college with tax-free earnings and tax-free withdrawals. Some states offer state income tax deductions or credits for 529 contributions. With Ohio’s 529 Plan, CollegeAdvantage, Ohio residents can currently deduct 529 contributions up to $4,000 per beneficiary, per year from their state income tax. However, with unlimited carry forward Ohioans can continue to deduct a large 529 plan contribution from their state income tax until all of it has been deducted.
A 529 plan can supplement these service-earned education benefits. If you split your Post-9/11 GI Bill benefits among multiple dependents, then a 529 plan can help cover the remaining qualified higher education expenses associated with attending a two-year or four-year college, trade or vocational school. Eligible expenses range from tuition; mandatory fees; computer equipment and related technology and services; books; supplies, and equipment required for enrollment or attendance; room and board costs or off campus housing during any academic period the beneficiary is enrolled at least half-time; 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), provided these costs are equal or less than the same room and board allowances from the accredited education institution
Military academy attendance and 529 plans
What if you’ve been saving for college in a 529 plan and your child is selected to attend an U.S. military academy? You still have access to the college savings funds. While considered a non-qualified withdrawal, the parents can ask for a 529 plan disbursement up to the estimated cost of attending the military academy without incurring a 10% federal tax penalty. The earnings portion only of the withdrawal will be subject to federal, state, and local taxes.
Why save in Ohio’s 529 Plan?
Morningstar, a trusted investment research and management company, has given Ohio’s CollegeAdvantage Direct 529 Plan a silver rating. In addition, BlackRock CollegeAdvantage, Ohio’s Advisor 529 Plan has a bronze ranking. This makes Ohio one of only six states that have both their Direct and Advisor 529 Plans placed ranked as medal class investment options by Morningstar. In the most recent Savingforcollege.com quarterly analysis of 529 plan investment performances, Ohio’s 529 Plan is listed as fifth in the nation in the thee-year and second in the nation in the five-year performance category. Additionally, Savingforcollege.com listed Ohio’s 529 Plan as one of its best-rated 529 college savings program across the U.S. Ohio’s 529 Plan also is only one of only four 529 college savings plan nationwide to earn a 5-Cap rating for both residents and non-residents.
On this Veterans Day, let us take pause and express our gratitude to all those who have served and are serving our great nation, for the many blessings of freedom we enjoy would not be possible without their willingness to answer the call to service.
Posted on November 8, 2018