Celebrate the season of love this Valentine’s Day. One way you can show your love to your children is by saving for their higher education. After all, it’s an investment in their future! Here are five reasons to love saving in Ohio’s 529 Plan, CollegeAdvantage, with all its benefits.
Fall For “Whatever School Comes After High School” 529 Plans
529 plans aren’t just for use at a traditional four-year program. Maybe your child is interested in starting at a community college or earning an associate degree? Or maybe they want to learn important skills at a trade or vocational program? You can use your 529 plan at any federally accredited educational institution – whether for an associate, bachelor’s, professional, or vocational degree. In fact, your child can also use a 529 plan to cover qualified expenses for graduate school, whether for the master's, doctoral, medical, or law degree.
And what happens if your child decides to attend a military academy after their high school graduation and, therefore, don’t need their college saving account? You may make a non-qualified withdrawal up to the estimated cost of attendance within the same calendar year at a military academy without incurring an additional 10% federal tax penalty. The earnings portion of this withdrawal will be subject to federal and state income taxes.
Fall For 529 Plan Tax Advantages
Ohio’s 529 Plan, CollegeAdvantage, helps families across the nation save money for their children’s future higher education costs with tax-advantaged benefits. First, all contributions and earnings grow tax free in a 529 plan, so all investment growth is yours to use to cover qualified costs. Second, a 529 withdrawal is tax free when used to pay qualified higher education expenses — those costs that are mandatory to attend a school. Third, Ohio residents who own a CollegeAdvantage 529 plan can deduct their 529 contributions from their Ohio taxable income. The deduction is now $4,000 per year, per beneficiary, with unlimited carry forward. This means that $4,000 per year is not a contribution cap. If an Ohio taxpayer contributes $8,000 in one tax year to one account, he or she will continue to subtract $4,000 per year, per beneficiary, from their State of Ohio taxable income until all the 529 contributions are deducted.
Fall For “Save Here, Go Anywhere” 529 Plans
Just because you saved in Ohio’s 529 Plan, it does not mean that your child has to attend an Ohio school. Your 529 college savings plan can be used nationwide at any accredited school that accepts federal financial aid. If the school has a Federal School Code on the Free Application for Federal Student Aid (FAFSA), then the withdrawals to cover qualified costs at that school will be tax-free. Therefore, you can use your 529 account almost anywhere you’re comfortable sending both your student and your money.
Fall For Tools To Shape Your 529 Plan
Ohio’s 529 Plan has calculators and tools to help you build the 529 account that meets your family’s college savings goals. Use the College Savings Estimator to receive a projection of your child’s future college costs. This tool will also provide you an estimated monthly contribution amount to reach your college saving goal. The Cost of Delaying Savings tool can approximate how much money you may need to set aside if you getting a late start on saving for higher education expenses. The Tax Benefit Tool can shows you the long-term advantages of tax-free growth in a 529 plan when compared to a taxable savings account.
No matter how old your child is, Ohio’s 529 Plan can provide 529 account savings strategies. For instance, if your child is a baby to toddler, it is a fantastic time to start saving for future college expenses to take advantage of compound interest. During kindergarten through elementary school, disappearing expenses like day care costs can be shifted to fund the college savings plan. When your child enters middle school and high school, you may need to increase your contributions. Even if your child is about to start or has even started college, the tax-free earnings, tax-free withdrawals, and the state income tax deduction for Ohioans can still build up the 529 account.
Additionally, you can simplify saving with automatic recurring contributions. This way, these consistent contributions are part of your planned budget and you don’t need to be concerned that you might spend the funds elsewhere. You can align 529 plan deposits with your paydays or schedule monthly contributions. Even small investments can add up to big savings over time through regular automatic contributions or payroll deductions.
Fall For The Power of Compound Interest In 529 Plans
It’s never too late or too early to start saving for your child’s future college costs. Any funds you can set aside in a 529 account is money your child won’t have to borrow for their higher education. However, a good reason to start a 529 college savings fund as early as possible is to take full advantage of the power of compound interest. Compound interest is a dynamic tool to build a 529 plan as it is interest gained on contributions, earnings, and interest already accumulated in the 529 account. It’s. The longer a college savings plan has time to develop, the longer compound interest can add the 529 account.
While compound interest in a 529 college saving plan is a huge advantage, compound interest with student loans is a huge disadvantage. By saving now with Ohio’s 529 Plan and earning interest, your child can avoid paying student loans later with interest.
Valentine’s Day — or any day — is a great time to show your love to your children and their dreams. Open an Ohio 529 Plan to save for your child’s future training and education. An investment in a 529 plan is an investment in your child. Remember, every dollar saved today is a dollar that doesn’t have to be borrowed later which makes Ohio’s 529 college savings plan an excellent alternative to student loan debt. For someday your child is going to college. Someday starts today with Ohio’s 529 Plan.