use for the children’s or grandchildren’s college and career training. However, only 32% of families are saving in a 529 account according to the 2025 How America Pays For College Report by Sallie Mae. Ohio 529 CollegeAdvantage wants to highlight all the benefits, including taxes, of saving in a 529 account. And it doesn’t take a lot to get started.
529 savings can really change your child’s life
A study from Center for Social Development (CSD) at the Brown School at Washington University in St. Louis show that when a child or grandchild knows that savings set aside for them, they are six times more likely to attend college than those with no account. And it’s not a huge dollar amount – it’s less than $500.
Your child is six times more likely to go to college when they know that there is money saved for their future education, even if it is less than $500. By saving for their college and career training in a tax-free Ohio 529 account, you show your belief in your children and their plans for the future. Your savings show that college is possible for them and your expectation that they will pursue education after high school.
What are the tax benefits of saving in Ohio’s 529 Plan?
There are several tax benefits to saving in a CollegeAdvantage Direct 529 Plan account.
First, earnings in a 529 plan grow tax-free, so all investment growth will be yours to spend on your children’s future qualified higher education expenses. Compound interest — the interest earned on contributions, earnings, and interest already accumulated in the 529 account — is included in the tax-free earnings.
Second, 529 plan withdrawals to pay for qualified higher education expenses are tax-free at accredited colleges, universities, two-year schools and certificate and credential programs that accept federal financial aid. These qualified costs are the mandatory expenses to attend the school or program such as tuition; room and board; mandatory fees; computer equipment and related technology as well as internet services; books, supplies and equipment related to enrollment and class schedule; and certain expenses for a special-needs student.
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 to use a 529 plan withdrawal.
Finally, Ohio residents who contribute to Ohio 529 can deduct up to $4,000 per year, per beneficiary, off their state income taxes with unlimited carry forward. Therefore, 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.
What if my child doesn’t go to an Ohio school?
If you have been saving with Ohio 529 for your child or grandchild, you can still use your 529 account for whatever comes after high school across the United States. There are over 30,000 schools nationwide that you can use an Ohio 529 account. If the school has a Federal School Code on the Free Application for Federal Student Aid (FAFSA), then withdrawals for the qualified higher education expenses at that school will be tax free.
What kind of education after high school can I use an Ohio 529 account?
529 plans can be used for your child's education or career training – whether for a two-year, four-year, graduate or professional degree, certificate and credential 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. Again, If the school has a Federal School Code on FAFSA, then withdrawals for the qualified higher education expenses at that school will be tax free.
You can also make a tax-free 529 withdrawal to pay for K-12 expenses at a private, public, or religious elementary or secondary school. These expenses include tuition; curriculum and curricular materials, books or other instructional materials, online educational materials, tuition for tutoring or educational classes outside of the home with certain requirements that must be meet, fees for a certain nationally standardized achievement test, advanced placement exam, or college admission exam (e.g. SAT, ACT) tests, fees for dual enrollment in an institution of higher education, and certain educational therapies for students with disabilities (e.g. occupational, behavioral, speech-language).There is a limit of $20,000 per year that can be withdrawn from a 529 account to pay for the K-12 tuition. If your child has more than one 529 plan, then the combined qualified distributions from all the 529 accounts for K-12 expenses is limited to $20,000 a year. Consult your qualified tax advisor for specific information.
Adults have always been able to use 529 plans for their own education. However, a recent 529 expansion includes credentialing costs for continuing career education such as tuition, fees, books, supplies, and equipment required for the enrollment or attendance of a designated beneficiary in a recognized postsecondary credential program. There are many prerequisites that the credentialing program must meet to use a 529 account for these expenses. Please consult a financial professional, tax advisor, or IRS regarding the applicability of these K-12 expenses expansion to your personal situation.
What if we’re expecting financial aid?
When filling in FAFSA, your 529 account is considered an asset. When owned by a parent, the 529 plan funds are assessed at a maximum of 5.64% of its value. Therefore, if you, as a parent, have saved $10,000 in Ohio 529 account, only $564 would count against your child’s potential eligibility for federal financial aid. A grandparent-owned 529 plan is no longer counted as an asset on FAFSA so it will have no impact on a grandchild’s eligibility for financial.
What if my child gets a scholarship?
Your Ohio 529 account is still an important component of your college savings strategy even if your child earns scholarships. Very few scholarships cover 100% of the costs. So, a 529 plan is perfect to pay for the other qualified expenses not covered by a scholarship, such as room and board.
If your child does receive a full-ride scholarship, you can withdrawal the matching amount of the scholarship from your 529 plan. As this is a non-qualified withdrawal, you will have to pay taxes on the earnings portion.
What if my child doesn’t go to college?
You always have access to the money you have saved in Ohio 529. So, if your child decides not to pursue their education after high school, you have options. First, hold onto the account to see if your child rethinks their decision since there are no time limits using a 529 account. In the meantime, let the 529 plan sit and watch the tax-free earnings continue to grow. If your child definitively decides that they don’t want a higher education, you can transfer the funds to any member of the family of your beneficiary, including yourself, without any tax consequences. A member of the family is anyone related to the original beneficiary by blood, marriage, or adoption.
Additionally, you can use one child’s Ohio 529 account savings to pay the principal and interest on certain qualified education loans for their siblings. The loan repayment provisions apply to repayments up to $10,000 per individual. This $10,000 is a lifetime amount, not an annual limit.
There’s another option on how to use those 529 funds with a 529-to-Roth IRA Rollover. With this tax-free and penalty-free Roth IRA rollover option, you can take those 529 education savings and give your children a jump start on their retirement savings. However, your 529 account must fulfill certain qualifications to do this rollover.
You also have the option of withdrawing all the funds from your 529 plan. There will be a 10 percent federal tax penalty as well as taxes assessed at the state and federal level on the earnings portion only of the withdrawal.
Does Ohio 529 have an app?
Ohio 529 offers the READYSAVE 529 app, so you can open and then manage your savings from your phone! The app makes it easy to start an account, access your information, track account growth, make one-time or recurring contributions from your bank account, as well as make withdrawals when the time comes, from your cell phone. The READYSAVE 529 app is available at the Apple and Google Play app stores. Once installed, select Ohio 529 and log in with the same username and password you use to access your account online.
Visit Ohio 529 CollegeAdvantage 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. Learn, plan, and start with Ohio 529 today at CollegeAdvantage.
This article was originally posted in April 2020 and has been updated to reflect new information for 2026.
