I am a firm believer in the power of saving in a 529 plan as my family has personally experienced its benefits. My husband and I saved in Ohio's 529 Plan for our two children’s education and career training after high school. With the help of our extended family, they both graduated from their respective colleges DEBT FREE! And now, I am saving for my two wonderful grandchildren for their future education.
As we celebrate May 29 as 529 Day, I want to share the many reasons why my husband and I chose to save in a 529 account.
529 tax benefits
All earnings in a 529 plan are tax-free, so all investment growth is yours to use for higher education expenses. Compound interest—the interest earned on contributions, earnings, and interest already accumulated in the 529 account—is included in your tax-free earnings.
529 plan withdrawals for qualified higher education expenses are also tax-free at schools that accept federal financial aid. These costs include tuition; room and board 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. Room and board costs can also include rent for off-campus residencies—apartments, rental homes, and Greek fraternities and sororities’ houses—and groceries (non-taxable items only), provided these costs are equal or less than the school’s room and board allowances. 529 plans can also pay for fees, textbooks, supplies, and equipment, including required trade tools for registered apprenticeships.
Ohio residents who contribute to Ohio’s 529 Plan, can deduct up to $4,000 per year, per beneficiary, off their state income taxes with unlimited carry forward. So, if you contribute more than $4,000 in one year, you can continue to subtract $4,000 per year, per beneficiary, from your State of Ohio taxable income until all the 529 contributions are deducted.
Use at many kinds of schools!
529 plans can be used for your child's education and career training after high school – whether for a two-year, four-year, graduate degree, certificate programs, registered apprenticeships programs, or any other post-secondary credential. This list includes community colleges and technical schools, vocational or trade schools, graduate schools, and even some study-abroad programs. If the school has a Federal School Code with the Federal Student Aid, an office of the U.S. Department of Education, then you can pay for qualified costs there with a tax-free 529 withdrawal.
Others can help save
As the adage says, “It takes a village to raise a child.” When our loved ones asked us for gift ideas for our children, we asked for contributions to their 529 accounts for their future. In Ohio contributions to a 529 plan start at $25. Ohio 529 also offers Ugift, which allows trusted family members and friends to make online gift contributions directly to your children’s 529 accounts without needing the actual account number. After logging in to your Ohio Direct 529 Plan, you can set up an Ugift code to send to your loved ones who would like to give the gift of a higher education. With the Ugift code, friends and family can visit Ugift529.com to make their electronic contribution securely from their bank account. It’s that easy.
529 flexibility
Not only can you use your 529 account for post-secondary education expenses, but you can also use it for K-12 tuition at a public, private, or parochial elementary or secondary school. This means your savings can cover many costs for elementary, secondary, and post-secondary education. The 529 withdrawal limit is $10,000 per year to pay for K-12 tuition. Consult your qualified tax advisor for specific information.
Families can also pay for a student loan that qualifies for the federal student loan income tax deduction with a 529 distribution. There is a $10,000 lifetime limit for the beneficiary of a 529 account. Another $10,000 can repay the qualified student loans of the beneficiary’s siblings.
At the start of 2024, a new tax-free qualified distribution was added to 529 accounts. Now, any remaining funds in a 529 account can be rolled over into a Roth IRA for the same beneficiary as the 529. There are prerequisites that must be met to use this new qualified distribution. Consult your qualified tax advisor for specific information.
There’s a lot to celebrate about 529 plans on 529 Day. After all, any investment in a 529 plan is an investment in your child’s future.
Since 1989, Ohio’s 529 Plan has been helping families across the nation save for their children’s higher education with many tax benefits. Ohio’s 529 Plan covers qualified expenses at any four-year college or university, two-year community college, trade or vocational school, apprenticeship approved by the U.S. Labor Department, or certificate programs, or continuing education classes nationwide that accepts federal financial aid. Learn, plan, and start for as little as $25 today at CollegeAdvantage.
About the author: 
Trisha Good is the executive director of Ohio Tuition Trust Authority. She has proudly worked for the agency for 28 years. Since 1989, Ohio Tuition Trust Authority has sponsored and administered Ohio’s 529 College Savings Program, CollegeAdvantage. Ohio’s 529 Plan oversees nearly 675,000 accounts and over $17.22 billion in assets as of March 31, 2024.
