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This autumn, fall in love with 529 plans. If you have dreams of a higher education for your child, Ohio’s 529 Plan can help you make them a reality. With your dedication to your dream coupled with all the advantages of saving for college in a 529 account, it becomes a powerful combination. Here are five facts to fall for with Ohio’s 529 Plan, CollegeAdvantage.
Fall For 529 Plans To Cover Whatever School Comes After High School
529 plans are not just for 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.
With the recently signed SECURE ACT component of the Further Consolidated Appropriations Act, 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.
What happens if your child decides to attend a military academy after their high school graduation and, therefore, does not 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. Or you can change to beneficiary of the 529 to another member of the family – by either blood, marriage, or adoption — with no fees.
Fall For The Tax Advantages Of Saving In A 529
For over 30 years, Ohio’s 529 Plan has helped 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, that doesn’t 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 are 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 planner 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 waiting 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. There’s also a tool to discover with what level of investment risk with which you’re comfortable.
No matter how old your child is, Ohio’s 529 Plan can provide life stage account savings strategies. For instance, if your child is a baby or toddler, it is a fantastic time to start saving for future college expenses to take advantage of compound interest. During elementary school, disappearing expenses like day care costs can be shifted to fund the college savings plan. When your child enters middle school and through high school, you may need to increase your contributions. Even if your child is about to start or has started college, the tax-free earnings, tax-free withdrawals, and the state income tax deduction for Ohioans can still build the account.
You can also simplify saving with automatic recurring contributions. These consistent contributions are part of your budget so you don’t need to be concerned that you might spend the funds elsewhere. You can align 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 set aside in a 529 account is money your child won’t have to borrow for their higher education. However, the best 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. The longer a college savings plan has time to grow, the longer compound interest can add to the 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.
Bonus: Fall In Love With Paying Students Loans With A 529
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.
Visit Ohio’s 529 Plan online to start saving today for your child’s future education. An investment in a 529 plan is an investment in your child where every dollar saved today is a dollar that doesn’t have to be borrowed later. A 529 account can be used for whatever comes after high school. If you’d like to do more research, explore Ohio’s 529 Plan —The Plan That Can.
Posted on October 13, 2020