April Showers: Making It Rain For Your 529
The adage is April showers brings May flowers. April showers can also make it rain for your 529. April is a time of growth and while you watch your flowers bloom, you can also plant some seeds to have your Ohio’s 529 Plan, CollegeAdvantage, account bloom, too.
Grow by Rethinking Your Refund
April is known not just for being the start of the spring, but also the end of tax season. Hopefully, you got your tax return out earlier this month. If you’re getting some money back, you may want to rethink your refund. Saving your tax refund in Ohio’s tax-free 529 Plan could be your entire college savings plan.
Ohio’s 529 Plan has figured out how much in-state tuition you might cover by saving your tax refunds for 13 years. For instance, by saving $2,776 a year, you could pay for 75% of a two-year chemistry degree; by saving $588 you could cover 100% of a two-year medical assistant degree; or by savings $288, you could pay for 1000% of firefighter training. Watch this video to see the numbers! If you’d like to crunch the numbers yourself, use our College Savings Planner to see your tax refund can really grow your tax-free 529 plan.
Grow through three tax benefits
And why do we say a tax-free 529 plan? There are three major tax benefits for saving for your child’s higher education in Ohio’s 529 Plan and they can help your 529 grow.
First, the 529 account grows with tax-free earnings. This means all the investment growth is yours to use for your children’s future college costs. Compound interest, which is the interest earned on contributions, earnings, and interest already accumulated in the 529 account, is included in the tax-free earnings. If you’d like to see how much tax-free earnings can grow your college savings account, use our Tax Benefit Tool and compare the total of a tax-free 529 account to the total in taxable savings account.
Second, when used for qualified higher education expenses, 529 withdrawals are also tax-free. These costs are the ones that are required to attend a federally accredited educational institution. They include most of the large expenses such as:
- room and board during any academic period in which the 529 beneficiary is enrolled for at least half of the full-time academic workload according to the eligible education institution. Room and board can also include rent for off-campus residency and non-taxable only groceries, provided these costs are equal or less than the room and board allowances at the accredited education institution;
- mandatory fees;
- computer equipment and related technology as well as internet services;
- books, supplies and equipment related to enrollment and class schedule; and
- certain expenses for a special-needs student.
Third, if you are an Ohio resident, then you can deduct your Ohio 529 contributions from your Ohio taxable income, up to $4,000 per year, per beneficiary, with unlimited carryforward. This means that the $4,000 per year, per beneficiary is not a contribution cap. You can continue to subtract $4,000 per year, per beneficiary, from your Ohio taxable income until all the 529 contributions have been deducted. Ohio is one of two state programs that has unlimited carryforward. Only eight state programs offer any carryforward.
Grow with automatic deposits
Another simple way to plant some seeds to grow your 529 account is to set up automatic deposits. You may find it’s easiest to have your contributions automatically transferred from your personal checking or savings account by matching it to your paycheck deposits or to another monthly contribution schedule.
Some employers offer payroll direct deposit, where regular contributions of $25 or more can be deposited directly into your Ohio 529 Direct Plan account. First, log in to your account, then under recurring contributions, select payroll deduction. Set up the contribution dollar amount then hit submit. Once it’s processed, go to the “Get Form” to print it then submit it to you payroll department. If you manage your direct deposit through an employee portal, then enter the information from the form and list it as a checking account. Please note that a Fifth Third Certificate of Deposit (CD), which requires a $500 minimum contribution to open, is not available for purchase through automatic recurring contributions or payroll deduction.
Grow by using our 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 estimate a monthly savings amount needed to reach your savings objectives. If you choose to grow that amount, this tool can show how planting a little more seed money can really add up in the 529. If you still considering opening a 529 plan to save for higher education costs, the tax benefit tool shows how the tax benefits of a 529 plan can grow 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.
By growing your Ohio 529 Plan, you’ll find it’s far cheaper to save for your child’s higher education now and earn tax-free interest in a 529 account than to pay off student loans that grows with accumulated interest later. With all the benefits offered in a 529, your account can grow to reach your college savings goals. Ready to start with Ohio’s 529 Plan? Visit CollegeAdvantage online to save for your child’s future training and higher education. Someday your child is going to college. Someday starts today with Ohio’s 529 Plan.
Posted on April 19, 2019