Give The Gift Of A Higher Education For Graduation
The Class of 2021 graduates are having a mix of different graduation ceremonies at the end of this very different school year. Are you looking for a gift with meaning during this year of unconventional celebrations? Consider the gift of higher education with Ohio’s 529 Plan.
A gift to their 529 plan shows you believe in your favorite student and their higher education dreams. For as little as $25, you can make a contribution to their 529 plan or start one to help with their future college costs.
529 plans can be used for whatever education comes after high school – whether it’s a four-year university, a two-year community college, a vocational school, a certificate program or an apprenticeship program.
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 primarily by states. (There is one plan run by private colleges and universities.) Ohio’s 529 Plan, CollegeAdvantage, has been helping families save for over 30 years.
What are the 529 benefits?
There are many reasons 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 for 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.
With passage of the SECURE Act, 529 plans can also be used to pay for certain apprenticeships costs — fees, textbooks, supplies, and equipment, including required trade tools. 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 any student loan that qualifies for the federal student loan income tax deduction to now be paid with a 529 distribution. There is a $10,000 lifetime limit per 529 beneficiary. However, an additional $10,000 can be used to repay qualified student loans for each of the beneficiary’s siblings.
There’s one last tax benefit for any Ohio resident who contributes to an Ohio’s 529 Plan account. Whether or not they are the 529 account owner, Ohio residents can deduct their contributions to Ohio’s 529 Plan from their taxable state income. The 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, apprenticeships, 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 loved ones can contribute to your Ohio 529 Plan.
The simplest 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. To learn more, explore Ohio’s 529 Plan — The Plan That Can — at CollegeAdvantage.com.
Posted on June 03, 2021