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September is not only the back-to-school season, it’s also College Saving Month! Whether you’re watching your child board the school bus or you’re helping them log on to start their digital school day, it’s never too late and it's never too early to save for whatever education comes after high school.
Ohio’s 529 Plan, CollegeAdvantage, can help forward-thinking parents make college doable. We have information, tools, and resources to share with parents as they develop their post-secondary school savings strategy.
Why save in Ohio’s 529 Plan
With Ohio’s 529 Plan, you can maximize your savings with 529 tax benefits, which include:
- tax-free earnings so all investment growth is yours to use;
- tax-free withdrawals for qualified higher education expenses, those costs — tuition, room and board, computers, mandatory fees — which are required for enrollment at a post-secondary educational institute;
- State of Ohio income tax deduction for Ohioans for CollegeAdvantage 529 account. The current eligible amount for deduction is up to $4,000 per year, per 529 account beneficiary. However, with unlimited carry forward you can continue to deduct a large 529 plan contribution from your state income tax until all of it has been deducted. For instance, if you contribute $12,000 to your beneficiary’s account, you can deduct $4,000 from your state income tax for the next three years.
Ohio’s 529 Plan can be used at schools nationwide
Saving for college in Ohio’s 529 Plan does not mean your child can only attend Ohio schools. You can use your Ohio 529 Plan funds almost anywhere that you are comfortable sending your child and your money. 529 plans can be used at any federally accredited educational institution, which is a post-secondary school that accepts federal financial aid. If you want to confirm that the schools your child is interested in attending accepts federal aid, then do a search. If the institutions have a Federal School Code for the Free Application for Federal Student Aid (FAFSA), then you can use your 529 funds there, whether it’s two-year, four-year, graduate, vocational, trade, or any other post-secondary school.
New qualified costs
With the passage of the SECURE ACT component of the Further Consolidated Appropriations Act at the end of 2019, certain apprenticeships costs — fees, textbooks, supplies, and equipment, including required trade tools— can now be paid with a 529 plan withdrawal. The apprenticeship program must be registered with the Secretary of Labor’s National Apprenticeships Act in order to use a 529 plan withdrawal. Interested parties can check the Labor Department’s search tool to confirm that a program is eligible.
The SECURE ACT also allows families to pay for any student loan that qualifies for the federal student loan income tax deduction with a 529 distribution. There is a $10,000 lifetime limit per 529 beneficiary. However, an additional $10,000 can be used to repay each of the siblings’ qualified student loans of the beneficiary. All withdrawal requests must be made within the same calendar year in which the expense was incurred, or when the student loan payment was made.
No more child care costs?
Is your child is starting to go to school full-time? Child care costs are a huge disappearing expense, one of those costs that are part of your budget for a short period of time. Why not roll over those some of these expenses to a regular 529 plan contribution? This way, those dollars you’ve already prioritized for pre-K education will now support your child’s higher education. And as those bills were already part of your budget, you won’t be missing the money if you shift them to build the 529 plan. With $100, you can build meaningful college savings no matter what kind of higher education your child pursues.
Tools to see your 529 savings add up
Ohio’s 529 Plan offers tools and calculators so you can create the 529 investment plan that’s right for your family. Start by answering the risk tolerance questionnaire to determine with which asset allocation mix you’d be most comfortable – conservative, moderate, or aggressive. Use the college savings planner to estimate the cost of your child’s college education, then set goals for how much you want to save toward the total expense. If you’ve started to save for college in a regular savings account, work with the tax benefit tool to see how tax-free growth in a 529 plan really adds up. And if you haven’t started to save yet, the cost of waiting tool can illustrate the advantages of saving early with the power of compound interest growing in the 529 account.
Save with loved ones’ contributions
Family and friends want to commemorate the big events in your child’s life. If they ask for gift ideas, tell them that they can help with the next big milestone in your child’s life – their higher education —with a contribution to your child’s 529 plan. With Ugift, it’s simple for anyone to contribute to your CollegeAdvantage Direct Plan account. Log in to your 529 account and click on Ugift to receive a unique code for your account. This code permits others to make online contributions to your 529 plan without needing the actual account number. Once they have the Ugift code, friends and family can visit Ugift529.com to make their electronic contribution securely from their bank account. The gift giver can make one-time or recurring electronic contributions at any time, and if they are an Ohio taxpayer, they can deduct their contributions up to $4,000 from their Ohio taxable income.
It's never too late to start saving
If you haven’t started to save for college costs, it’s never too late to open an account with Ohio’s 529 Plan. Every dollar saved is a dollar that isn’t borrowed, which makes a 529 college savings plan an excellent alternative to student loan debt. Even small 529 plan deposits can grow through the power of compound interests, tax-free earning, and tax-free withdrawals for qualified higher education expenses.
If you haven’t started saving for future higher education expenses, open your tax-advantaged Ohio 529 Plan! lf you’d like to learn more about the tax-advantaged way to save for college, explore Ohio’s 529 Plan —The Plan That Can.
Posted on August 28, 2020