You know the saying, “It’s never too late…” Well, it’s never too late to save for your child’s college education in a 529 plan, even if it’s their senior year of high school. Why? 529 plans offer many benefits to enhance the growth of funds placed aside for future college costs.
529 Plan Tax Benefits
The first benefit is tax-free earnings. If you are saving for college in a regular saving account, then you’re doing a good thing to support your child’s future. However, you’re missing the advantage of the tax-free earnings available with an Ohio CollegeAdvantage 529 plan. Earnings on a regular savings account will be taxed yearly but 529 investments grow tax-free at the federal and state level, ensuring that every dollar of growth is yours to use.
The second tax benefit is tax-free withdrawals for qualified expenses, those costs that are required to attend a two-year or four-year college as well as a vocation school. These costs include tuition; room and board while the 529 beneficiary is enrolled for at least half of a full-time academic workload; 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. 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 educational institution.
Certain costs for U.S. Labor Department-approved apprenticeships are also included as qualified higher education expenses. For tax purposes, the burden of proof for qualified expenses and withdrawals is placed on you as the account owner. Make sure to retain all documentation of your beneficiary's room and board costs and other 529-qualifed expenses.
A 529 withdrawal can also be used to pay for K-12 tuition at a private, public, or religious elementary or secondary school. There is a limit of $10,000 per year that can be withdrawn from a 529 account to pay for the K-12 tuition.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 tuition is limited to $10,000 a year. Consult your qualified tax advisor for specific information.
The third tax benefit of opening a 529 account is that Ohio residents receive a $4,000 deduction from their state gross income for matching contributions made to a CollegeAdvantage 529 account. Those dollars saved in your savings account? As an Ohio resident you can use that money to open a CollegeAdvantage, and claim that $4,000 deduction. And, you can contribute even more! Contributions over $4,000 per beneficiary, per year, can be carried forward to deduct from future tax years until all of your contributions are fully subtracted from your state taxable income.
Ask For Gifts Towards A College Education
For your child’s high school graduation party, their birthday, or the holidays, you can ask for gifts towards their college education. You can provide loved ones a Ugift code for your child’s account. This code permits others to make online contributions to your CollegeAdvantage Direct 529 plan account without needing the actual 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.
If the gift giver prefers to write a check, make sure it’s payable to Ohio Tuition Trust Authority and includes the 11-digit account number.
If you or another family member would like to make a substantial 529 plan contribution, you can invest up to $17,000 ($34,000 for married couples) per beneficiary without incurring any federal gift-tax consequences. You can even contribute up to $85,000 per beneficiary in a single year ($170,000 for married couples) and take advantage of five years’ worth of tax-free gifts at one time. For more information, please consult your tax adviser or estate-planning attorney.
Any Ohioan who donates to a CollegeAdvantage 529 account is eligible to deduct the contribution from their Ohio state taxable income.
Shop With Upromise To Add To Your 529 Account
After you’ve opened a CollegeAdvantage Direct 529 account, you can continue to add to the plan with your everyday shopping by joining Upromise. Connected with hundreds of America’s leading companies, a free Upromise membership can earn you cash back from stores from which you normally shop, including online retail stores and restaurants.
When you connect your debit and/or credit card to Upromise, you’ll start to earn rewards with your everyday shopping. Once you reach a certain level of savings, you can then roll over these rebates to build up your CollegeAdvantage Direct 529 plan.
Would you like to see how others used Upromise? Read this Saving Story from a CollegeAdvantage family who used it to add to their 529 savings.
Online Tools And Life Stage Strategies
Ohio's 529 Plan offers online tools to help you decide what saving strategy is the best fit for your family. The calculators include: College Savings Estimator, Cost Of Delaying Savings Calculator, and Tax Benefit Calculator By working with these four tools, you can adjust the 529 account according to your college savings goals, time frame before college, and how comfortable you are with risk to determine the right asset allocation mix.
Based on your child’s age, different 529 investment plan strategies should be considered. If they are close to needing the 529 account funds for college costs, you may want to adopt a more conservative asset allocation so the accrued funds aren’t susceptible to the volatility of the stock market.
Ohio’s 529 Plan Can Be Used Across The Nation
Your child may already know what school they’d like to attend. If they decide to go out of state, your college savings in Ohio’s 529 Plan can be used nationwide at any federally accredited educational institutions – whether for an associate, bachelor’s, graduate or vocational degree. It can also be used for certain expenses for an apprenticeship approved by the U.S. Department of Labor. So remember: just because you save in Ohio’s 529 plan does not mean your child can only attend a post-secondary education program in Ohio.
Rolling Over Funds To A 529 Plan
If you open an Ohio 529 Plan account with money transferred from another savings vehicle, please wait 4-7 business days before attempting to withdraw the newly deposited funds. This waiting period allows the money to clear the old account then to accumulate into the new 529 account. This time frame also holds true after you’ve made a 529 contribution: you’ll need to wait 4-7 business days before requesting the funds to pay for qualified college costs.
Once this waiting period is over, you can make payments directly to the school from your 529 account via an online withdrawal process. Or you can reimburse yourself for qualified expenses that you’ve paid out of pocket.
Even if you are getting late start with your college savings, CollegeAdvantage is how forward-thinking parents make college doable. Open your tax-advantaged college savings plan today at CollegeAdvantage.com. Ohio’s 529 Plan is an excellent alternative solution to student loan debt. Any funds you can set aside in a CollegeAdvantage account is money your child won’t have to borrow for their education. And that’s truly a gift. CollegeAdvantage is your plan, your way.
