For more than 33 years, Ohio’s 529 Plan has helped families nationwide save for education after high school for their children. Even though 529 plans have been around since 1989, many tales still abound about 529 college savings plans. Here’s the truth about the Ohio’s 529 Plan, CollegeAdvantage.

What if I save in my state’s 529 plan but my child wants to go to an out-of-state school?

Your Ohio 529 college savings plan can be used nationwide for whatever school comes after high school for your child–whether for an associate, bachelor’s, graduate, professional, vocational degree, or an apprenticeship. If the school has a  Federal School Code on the Free Application for Federal Student Aid (FAFSA), then you can make tax-free withdrawals to cover qualified expenses there.

What can I pay for with my 529 education savings?

One of the great advantages of saving for college in a 529 plan are tax-free withdrawals for qualified higher education expenses. If the cost is required for enrollment or attendance at a post-secondary educational institute, then it will mostly like be considered a qualified higher education expense. These expenses include:

• tuition;
• 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 costs can also include rent for off-campus residency and groceries (non-taxable items), provided these costs are equal or less than the same room and board allowances from 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;
• certain apprenticeships costs — fees, textbooks, supplies, and equipment, including required trade tools— can be paid for with a qualified tax-free 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;
• any student loan that qualifies for 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; and
• K-12 tuition up to $10,000 per student, per year, for enrollment at public, private, or religious elementary or secondary school.

What if my child doesn’t want to go to college?

You always have access to the funds saved in your Ohio 529 account and you always have options.

First, 529 plans can be used many types of higher education, not only four-year colleges or universities, but also two-year community colleges, trade or vocational schools, apprenticeships, and certificate programs. Again, if the program your child is interested has a Federal School Code on FAFSA, then you can use your 529 plans there. So, if your child wants to attend a welding school after high school, you can use your 529 plan to cover qualified costs there as long as the school accepts federal financial aid.

What 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.

Also, there are no time limits on when you have to use a 529 plan so you can wait to see if your child rethinks their decision about wanting a higher education.

If they still decide against continuing their education, you can transfer the 529 account to another member of the family—anyone related by blood, marriage or adoption–without any fees. The money you set aside for their higher education can be transferred to their sibling, their cousin, or even yourself.

You also have the option of withdrawing all the 529 funds. This will be treated as a non-qualified withdrawal; therefore, a 10% federal tax penalty will be imposed—comparable to an early withdrawal from a retirement savings vehicle—but only on the earnings. You would also be liable for any federal, state, and local income taxes on the earnings.

What if my child gets a scholarship?

529 plans are made to work with scholarships so your 529 plan is still an important component of your college-saving strategy. Very few scholarships cover 100% of the costs. A 529 plan is perfect to pay for any qualified expenses that the scholarship doesn’t cover.

Also, you can withdrawal the exact amount of the scholarship from your 529 account. This would be treated as a non-qualified withdrawal, but only the earnings portion the withdrawal will be subject to federal and state taxes.  A scholarship withdrawal is exempt from the 10% federal tax penalty.

Will my savings in an Ohio 529 affect financial aid?

If you, as a parent, own a 529 account for your child, the funds will only be included up to the maximum amount of only 5.64% in the Expected Family Contribution (EFC) on FAFSA. Put another way, if you have $10,000 in a 529 plan, only $564 will count in the federal financial aid calculations.

Can others give to my Ohio 529 account?

If your family and friends want to make a gift of higher education to your Ohio 529 account, Ugift makes it simple and secure. If you already have a CollegeAdvantage Direct Plan account, you can provide other family members an Ugift code for your child’s account. This code permits others to make online gift contributions directly to your Direct 529 Plan without your account number. Once you provide the Ugift code, friends and family can visit Ugift529.com  to make their electronic contribution securely from their bank account. It’s that simple.

If a loved one who is an Ohio resident wants to give the gift of higher education to your Ohio 529 account through Ugift, their contribution can be used as a deduction from their State Of Ohio income tax.

What if I’m starting too late?

It’s never too late to save for higher education costs. Unless your student is in the last semester of their higher education, there’s still time to save, whether the future is next semester or next decade. Every dollar you save now is one that your child won’t have to borrow. Start your savings with a tax-advantaged 529 plan in which earnings grow tax-free and withdrawals are tax-free when used for qualified higher education expenses.

For Ohio residents who contribute to an Ohio’s 529 account, they can deduct up to $4,000 from their Ohio state tax income tax for matching 529 contributions. However, the $4,000 deduction limit is not a contribution cap. For Ohioans who contribute over $4,000 per account, per year, they can carry forward this deduction to their Ohio adjusted gross income for subsequent tax years until all of their contributions are fully deducted.

To fully explain the unlimited carry forward of the state income tax deduction, let’s use two examples. An Ohio taxpayer contributes $4,000 to two 529 accounts for each of her two children, for a total of $8,000. She could deduct a total of $8,000 from her Ohio taxable income for the year. Alternatively, if an Ohio taxpayer contributed $8,000 to a CollegeAdvantage Direct Plan Account for one child in one year, he could deduct $4,000 from his Ohio taxable income during the current year, and also the next year.

Are there any fees to start saving in Ohio 529 Plan?

There is no fee to open a tax-frees Ohio 529 Plan. To start a 529 account, you just need to make your first contribution, which can be as small as $25. It’s that easy.

Does Ohio 529 have an app?

You can now quickly and simply access your Ohio 529 account from your cell phone with the READYSAVE 529 app. Our new savings app, developed in conjunction with our recordkeeping partner, Ascensus, makes it easy for you to access your account information, track account growth, and make both one-time and recurring contributions from the bank account on file from your cell phone! And with the READYSAVE529 app, you can send an invitation to your family and friends to contribute to your child’s higher education via Ugift.

You can download the READYSAVE 529 app now from the Apple and Google Play app stores. Once you install the app, select Ohio’s 529 Plan from the list and log in with the same username and password you use to access your account online.

What if I don’t know how to get started?

Ohio’s 529 Plan, CollegeAdvantage wants to help you! Ohio’s 529 Plan offers tools and calculators to shape your 529 plan. Crunch the numbers with the College Savings Estimator to calculate estimated college costs and determine the monthly amount to contribute to reach your savings goals. If you’re wondering when you should start saving for their higher education, use the Cost Of Delaying Savings Tool to see what a difference starting early can do for building up the 529 plan. The Tax Benefit Tool shows how a tax-advantaged 529 plan can grow when compared to a taxable savings account. Don’t forget, the sooner you start the 529 account, the sooner the power of compound interest and tax-free earnings can go to work growing the account. Use our blog page as a resource to find answers to more specific questions you may have. lf you already have a 529 plan, it might be time to review these life-stage account strategies or perform account maintenance.

Visit Ohio’s 529 Plan online to start saving today for your child’s future education. A 529 account can be used for whatever school comes after high school. 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. Learn, plan, and start with Ohio’s 529 Plan today at CollegeAdvantage.com.

This blog was originally posted in October 2020 and has been updated to reflect new information for 2023.