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Whether you are listening to Pomp and Circumstance as you watch your child cross the stage wearing a paper plate “mortarboard” to receive their preschool diploma or if you watching your child cross the stage in a gown and mortarboard to collect their high school diploma, you have big dreams for them. Dreams of a higher education and a bright future. A 529 college savings plan can help them achieve both of those dreams.
Whether it is a preschool, elementary, middle, or high school graduation, you probably were not alone at this celebration. Many loved ones care for your children and want to come along side your dreams for them. You may already be preparing for their higher education dream by saving in a 529 plan for their college costs. If you are looking for meaningful gift ideas to celebrate these special occasions, ask for the gift of higher education with a contribution to your child’s 529 plan. It’s simple for your loved ones to do and it’s truly a gift with positively impact.
Let’s go over some 529 facts to show why it’s great way to save for a higher education.
What is a 529 plan?
A 529 plan is the tax-advantaged way to save for future higher education expenses. Created by Section 529 of Internal Revenue Code, these college savings programs are sponsored mostly by states. There are some programs run by educational institutions. Ohio’s 529 Plan, CollegeAdvantage, has been helping families save for nearly 30 years.
What are the 529 benefits?
There are many reasons why to save for your child’s future higher education in Ohio’s 529 Plan. Let’s start with the tax benefits.
All earnings in a 529 plan are tax-free, so all investment growth is yours to cover college costs. Compound interest — the interest earned on contributions, earnings, and interest already accumulated in the 529 account — is included in the tax-free earnings. To see just how tax-free growth adds up with a 529 savings plan, use the tax benefit tool to see the difference between a 529 plan account and a taxable savings account.
In addition, 529 plan withdrawals to cover qualified higher education expenses are tax-free at accredited programs that accept federal financial aid. These expenditures include tuition; room and board (on and off campus) 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.
Additionally, any Ohio resident who contributes to an Ohio’s 529 Plan account can deduct their contributions from their taxable state income, whether or not they are the account owner. This deduction amount is $4,000 per year, per beneficiary, with unlimited carry forward, making Ohio one of only two programs nationally that offer this benefit. For Ohioans, this means that the $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 the 529 contributions are deducted.
Where can my family use our 529 plan?
Basically speaking, you can use your 529 savings at any school or program that accepts federal financial aid, which means it’s federally accredited. To check out if the school or program your child is interested in attending accepts federal financial aid, visit the website where you would fill out the Free Application For Federal Student Aid (FAFSA). While there, do a search to see if the school has a federal school code. If so, then you can use the 529 funds there to cover qualified costs.
What types of schools can be paid for with my 529 plan?
529 plans can be used for whatever school comes after high school – whether for a two-year, four-year, graduate or professional degree, or any other post-secondary credential. This list includes community colleges, vocational or trade schools, graduate schools, and even some study-abroad programs.
And it’s important to note that while you have saved in Ohio’s 529 Plan, but you can use your funds at schools nationwide, not just in Ohio.
How others can give a gift of a higher education
There are a few different ways for loved ones to contribute to your Ohio 529 college savings plan.
The simplest to use is Ugift. As the 529 plan account owner, you can log in to your account and click on Ugift to receive a unique code for each of your beneficiaries. This code permits others to make online contributions to your CollegeAdvantage Direct 529 plan account without needing the actual account number or your child’s Social Security number. Once you share the code, friends and family can visit Ugift529.com to make their electronic contribution securely from their bank account. The code will last so loved ones can continue to contribute at any time they’d wish.
If the gift giver would prefer to write a check, make sure it’s payable to Ohio Tuition Trust Authority and includes the 11-digit account number. You will then mail it in with this form. If your child receives monetary gifts as a graduation gift, you can also deposit that money into your 529 account by first depositing the money into a checking account then follow the above-mentioned steps.
It’s just that simple for someone to give your child a gift of a higher education. It’s just that simple for loved ones to support your dreams for your children. For someday your child is going to college. Someday starts with Ohio’s 529 Plan, CollegeAdvantage.
Posted on May 3, 2019