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529 Tips

10 Reasons To Save For College With Ohio's 529

Congratulations on taking the first step in saving for your children’s higher education by doing research. You’ll discover that saving for college in a tax-free 529 plan will be one of your best options. There are many great reasons to choose to save in Ohio’s 529 Plan, CollegeAdvantage. We’ve chosen 10 of the top benefits to highlight.

1) Ohio 529 Tax Advantages

For over 30 years, Ohio’s 529 Plan has helped families across the nation save money for their children’s future higher education costs with tax-advantaged benefits. First, all contributions and earnings grow tax free in a 529 college savings plan, so all investment growth is yours to use to cover qualified costs. Second, a 529 withdrawal is tax free when used to pay qualified higher education expenses — those costs that are mandatory to attend a school. Third, Ohio residents who contribute to an Ohio 529 account can deduct those 529 donations from their Ohio taxable income. The deduction is $4,000 per year, per beneficiary, with unlimited carry forward. This means that $4,000 per year is not a contribution cap. If an Ohio taxpayer contributes $8,000 in one tax year to one account, he or she will continue to subtract $4,000 per year, per beneficiary, from their State of Ohio taxable income until all the 529 contributions are deducted.

2) Use Ohio 529 For Whatever Comes After High School

529 plans aren’t just for traditional four-year colleges or universities. Maybe your child is interested in starting at a community college or earning an associate degree? Maybe they want to learn important skills at a trade or vocational program? Or they show great aptitude in a certain field and want to pursue an apprenticeship in it? You can use your 529 account at any federally accredited educational institution – whether for an associate, bachelor’s, professional, or vocational degree. In fact, your child can also use a 529 plan to cover qualified expenses for graduate school, whether for the master's, doctoral, medical, or law degree.

Certain apprenticeships costs — such as fees, textbooks, supplies, and equipment, including required trade tools— can be paid with a 529 withdrawal. The apprenticeship program must be registered with the Secretary of Labor’s National Apprenticeships Act in order to use a tax-free withdrawal from a 529 plan. Check the Labor Department’s search tool to confirm that a program is eligible.

If your child wants to attend a military academy after their high school graduation, they won’t need their college saving account. You still have options and still have access to the 529 funds. 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 only 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 – by either blood, marriage, or adoption — with no fees.

3) Save In Ohio’s 529 But Go Anywhere

While you save in Ohio’s 529, your college savings plan can be used nationwide at any school that accepts federal financial aid. If the school has a Federal School Code on the Free Application for Federal Student Aid (FAFSA), then the withdrawals to cover qualified costs at that school will be tax-free. This may even include some international study programs. Therefore, you can use your 529 account almost anywhere you are comfortable sending both your student and your money.

4) Ohio 529 Flexibility To Pay College Costs

What can you pay for with your 529 account? You’ll find that these flexible tax-advantaged college savings accounts cover many of the mandatory costs for attending a higher education institution. And your 529 plan withdrawals are tax-free with used for qualified higher education expenses.

  • tuition;
  • room and board for on- and off-campus living. If a 529 withdrawal is being used to cover rent for off-campus residency and groceries (non-taxable items only), these costs must be equal or less than the school’s on-campus room and board allowances;
  • mandatory fees;
  • computer equipment, related technology (but not game related) as well as internet services;
  • books, supplies and equipment related to enrollment and class requirements;
  • certain expenses for a special-needs student.
  • qualified costs for apprenticeships such as fees, textbooks, supplies, and equipment like required trade tools. The apprenticeship program must be registered with the Secretary of Labor’s National Apprenticeships Act in order to use a 529 plan withdrawal.

5) Your Ohio 529 Can Now Pay Students Loans

The 2020 SECURE Act allows for families to pay for a student loan with a 529 plan withdrawal as long as the loan qualifies for the federal student loan income tax deduction with a 529 distribution. There is a $10,000 lifetime limit for your child, as the beneficiary of a 529 college savings account. However, an additional $10,000 can be used to repay the qualified student loans of your other children, the siblings of the original 529 beneficiary. All withdrawal requests must be made within the same calendar year in which the expense was incurred, or when the student loan payment was made.

6) Wide Variety Of Investment Option In Ohio 529

Ohio’s 529 Plan offers different investment options to appeal to different types of savers — from conservative to more aggressive risk options, to set-it-and-forget-it portfolios, to build-your-own portfolio, to fixed-income options to cash preservation —  and help families in 2021 who want to save for their children’s higher education.

The available investment options include ready-made, age-based portfolios, ready-made risk-based portfolios, individual investment options, and FDIC-insured banking options. Ohio’s 529 Plan teamed up with trusted industry partners such as VanguardDimensional, and Fifth Third Bank to offer these investment choices.

Some of CollegeAdvantage’s most popular investments are ready-made age-based portfolios — the “set-it-and-forget-it” college savings plans. These ready-made age-based portfolios align with college savings industry’s best practice of smoother glide paths. A glide path determines the asset allocation mix within an investment option. For an age-based 529 portfolio, the asset allocation mix is managed through age bands. The asset allocations within the bands will automatically adjust to reduce the amount of riskier investments to more conservative ones as your child grows closer to needing the funds to cover their qualified higher education expenses. This smooth glide path is similar in concept to retirement target-date funds.

Ohio’s 529 Plan has two different paths for age-based option – Advantage Age-Based Portfolios (AABP) and Vanguard Ready-Made Age-Based Portfolios.

7) Many 529 Options If Your Child Doesn’t Go To College

One of the most frequently asked questions we hear is, “What happens if my child decides not to go to college?” It’s an understandable concern for parents who have been saving in a 529 plan for their child’s future higher education costs. The answer is that you have many options and you always have access the funds saved in your 529 account.

Is your child not interested in attending a traditional four-year program? Your 529 plan is made to work at any higher education institution that receives federal financial aid. Check the FAFSA (Free Application for Federal Student Aid) website to search for your Federal School Code. If the institution has a Federal School Code, then you can use your 529 plan there. This includes community colleges, trade/vocational schools, apprenticeships, and certificate programs.

Your child could also change their mind about earning a higher education once they enter the work force. The good news is that a 529 account can be used at any point in your beneficiary’s life, whether at 18, 28, 58, or 78. Whenever they decide to seek a college education or vocational schooling, your 529 plan is ready to cover their qualified higher education expenses. Until that time, your college savings account can continue to build through tax-free earnings.

You can also transfer the 529 funds from your child to another member of the family without any fees or costs. This can be anyone who is related by blood, marriage or adoption — like siblings, stepsiblings, stepparents, cousins, nieces, nephews, and even yourself. You could also hold onto the account for your grandchildren’s future college costs since there are no time limits for using 529 plans. And, if you’re a grandparent who owns accounts for multiple grandchildren, you can transfer from one grandchild to another, whether they’re siblings or cousins.

If you reach a point where the 529 account is just not going to be used, you can request a non-qualified withdrawal from your 529 plan. This means that the earnings-only portion of the withdrawal will be taxed on the federal, state, and local level. Like other tax-advantaged saving programs, there will be a 10% federal tax penalty assessed for withdrawing money from the 529 plan for costs that aren’t considered qualified higher education expenses. As the 529 account owner, you can direct the non-qualified withdrawal to your child who is the account beneficiary. Before you elect to make a non-qualified withdrawal, first talk with your financial advisor or tax consultant to evaluate your options.

8) Little Effect On Financial Aid

When filling in the Free Application for Federal Student Aid (FAFSA) form, your Ohio 529 account is considered an asset. When FAFSA consider your family’s Expected Family Contribution (EFC), it assesses assets at different percentages. 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’s 529 Plan account, only $564 would counted for your child’s potential eligibility for need-based Federal financial aid.

9) Everyone Can Contribute To An Ohio 529

Grandparents, family, and friends want to commemorate the big events in your child’s life. If they ask for gift ideas, tell them that they can help with a big milestone in your child’s life – their higher education —with a contribution to your child’s 529 plan. With Ugift, it’s simple for anyone to contribute to your CollegeAdvantage Direct 529 Plan account. Log in to your 529 account and click on Ugift to receive a unique code for your account. This code permits others to make online contributions to your 529 plan without needing the actual account number. Once they have the Ugift code, friends and family can visit​ to make their electronic contribution securely from their bank account. The gift giver can make one-time or recurring electronic contributions at any time, and if they are an Ohio taxpayer, they can deduct their contributions up to $4,000 from their Ohio taxable income.

If the gift giver would prefer to write a check, make sure it’s payable to Ohio Tuition Trust Authority (the state agency which administers Ohio’s 529 Plan) and includes your child’s CollegeAdvantage Direct Plan 11-digit account number.

What if a loved one wants to jump-start your child’s college fund? Per federal 529 laws, an individual can give up to $15,000 or a married couple give $30,000 to each child annually without triggering a federal gift tax. Single filers can also make a one-time $75,000 contribution and married couples can give $150,000 per child to take advantage of five-year’s worth of tax-free gifts at one time. For more information, have them talk with their tax adviser or estate-planning attorney.

10) It’s Simple To Open An Ohio 529 And It’s Affordable

If you’re ready to start saving for your child’s future higher education expenses, it’s simple to go online to open an account in minutes. You can open and account with as little as $25. And you can make a contribution with as little as $25. Here’s a step-by-step guide on how to open an account.

Ohio’s 529 Plan provides a list of all the information you will need to start an account. There are also tools and calculators to shape your 529 plan. Crunch the numbers with the College Savings Planner 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 Waiting 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.

Visit Ohio’s 529 Plan online 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’s 529 Plan today at

Posted on August 09, 2021

Ohio Tuition Trust Authority

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