Bring Your 529 Home To Ohio With A Rollover
Why save for your child’s higher education in a 529 plan? A 529 plan can be used nationwide, not just in the state in which you started the college savings account. But the major advantage is the tax benefits. 529 plans offer tax-free earnings, so every dollar gained in the 529 account is yours to use, and tax-free withdrawals for qualified higher education expenses.
But you already know this, because you opened a 529 while living somewhere other than Ohio!
Did you know though, that depending on what state in which you reside, a 529 plan can offer a state income tax credit or deduction. If you’re a resident of Ohio, you can deduct up to $4,000 per beneficiary, per year from your State of Ohio income taxes for matching contributions to Ohio’s 529 Plan, CollegeAdvantage.
If you have opened a 529 plan in another state
If you have been saving in another state’s 529 plan but are now a resident of Ohio, welcome home! You can open an Ohio 529 Plan to take advantage of Ohio’s $4,000 state income tax deduction. You also have the option of rolling over your former home state’s 529 account to an Ohio 529 Plan. Your soon-to-be former 529 plan may impose restrictions or limitations on rollovers, so make sure to investigate this alternative thoroughly before requesting a rollover. You will also want to check with your tax advisor first to see if there are any tax ramifications for rolling over your former home state’s 529 plan if the program offered state income tax deductions or credits for contributions.
If you contributed to a state’s 529 program but didn’t live there or contributed to state’s 529 Plan where there is no tax benefit, then you shouldn’t have received any additional tax benefits like the state income tax deduction or credit.
Rollover contributions from another state’s 529 plan
There are no penalties or federal income tax consequences for rolling over money from another state’s 529 plan to a CollegeAdvantage Direct Plan account, provided it has been more than 12 months since there was a previous rollover for the same beneficiary of the account. The beneficiary is the student whose qualified higher education expenses will be paid with the 529 funds.
It’s simpler than expected to rollover funds from one 529 program to another. There are two processes – direct or indirect.
With a direct rollover, the funds are transferred from the original account to the new 529 plan account. Please keep in mind that both the account owner and beneficiary for your other state’s Plan must be match the CollegeAdvantage Direct Plan. When setting up your Ohio 529 account, you can rollover the assets in your old 529 plan as an initial contribution by checking the appropriate box in the initial contribution section on the paper account application.
When making the rollover, you will need to provide Ohio’s 529 Plan with the basis, also known as principal, and earnings statement from your former 529 plan, which shows the earnings portion of the contribution. If Ohio’s 529 Plan does not receive such documentation within 60 days of receipt of the contribution, the entire amount of your contribution will be treated as earnings per IRS rules governing 529 plans.
To request a direct rollover from another 529 plan, complete an Incoming Rollover Form and send it to CollegeAdvantage Direct 529 Savings Plan, P.O. Box 219305, Kansas City, MO, 64121-9305. Ohio’s 529 Plan will request the funds from the other 529 plan.
If setting up your new Ohio 529 Plan account online, you will come to the section titled, “Pick A Funding Method.” Once there, select the “With a rollover or transfer” option. After you fill in the requested information, the website will generate a rollover form and a letter of acceptance, which instructs your 529 plan provider that you want to transfer your assets to Ohio’s 529 Plan, CollegeAdvantage. You will need to download, print, and mail these forms to the former 529 plan provider.
You can also make an indirect rollover to your new Ohio 529 account. An indirect rollover is when you close your former 529 plan account and receive a check made payable to you or the beneficiary, from which you will then contribute the money to a CollegeAdvantage Direct Plan.
To avoid penalties and federal income tax consequences, the funds you received when you rolled over the 529 money to your bank account must be contributed to a CollegeAdvantage Direct Plan Account within 60 days of withdrawal from the distributing 529 Plan. Ohio’s 529 Plan has no responsibility to, and does not, monitor the timing of indirect rollovers, and will not accept or reject indirect rollovers based on timing. Investors must ensure compliance with the timing required under federal law to avoid tax consequences.
As with the direct rollover, there is required rollover documentation. When contributing the indirect rollover, you will need to provide Ohio’s 529 Plan with the basis, also known as principal, and earnings statement from your former 529 plan, which shows the earnings portion of the contribution within 60 days of the check being issued.
If you have any additional questions about rolling over funds from another state's college savings program to Ohio's 529 Plan, our Customer Service Representatives are happy to guide you through the process. You can reach them at 1-800-AFFORD-IT (233-6734) from 8:30 a.m.-6 p.m. EST Monday-Friday.
Ohio’s tax-free 529 college savings plan is a simple way to save for any higher education goal and it’s accepted nationwide. As an Ohio resident, when you save in Ohio’s 529 Plan, you can also deduct up to $4,000 from your state income taxes for matching contributions to your 529 account. Someday your child is going to college. Someday starts at CollegeAdvantage.com.
Posted on January 16, 2020