Why save in an Ohio 529 CollegeAdvantage account for your children’s and grandchildren’s college and career training costs? All the tax advantages! And these benefits are in addition to the power of compound interest in growing your savings, as well as the wide variety of investment options available to suit your savings style in Ohio 529.
With Ohio 529, you can save here for children and grandkids who live anywhere. Ohio’s top-rated 529 Plan can be used at over 30,000 schools nationwide including four-year colleges and universities; community colleges; trade, technical, or vocational schools; certificate programs; apprenticeships; and even graduate schools.
Back to the tax advantages. There are three ways to reduce your taxes while saving with Ohio 529: Tax-free earnings, tax-free withdrawals, and state income tax deduction for Ohio residents.
Tax-free earnings advantage
Tax-free earnings = tax-free growth. As you are adding to your 529 account, you are using after tax dollars. So, you won’t be taxed on them again.
With your 529 savings growing tax free, all investment growth will be yours to spend on your 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. And long-term compounded growth is something investment people get excited about. It basically means the money you made is making even more. And when that growth is tax-free, you aren’t giving a chunk of it back every year.
Tax-free withdrawals advantage
Highlighting its flexibility, withdrawals from Ohio 529 are tax-free when used for qualified higher education expenses. And these costs run the gamut of college and career training costs and some surprising other uses. These include:
- Tuition.
- Room and board when enrolled for at least half of the full-time academic workload. Room and board costs can also include rent for off-campus residency—including apartments, homes, and Greek letter housing—and non-taxable groceries, provided these costs are equal or less than the same room and board allowances from the school.
- Mandatory fees.
- Computer equipment and related technology as well as internet services.
- Books, supplies, and equipment related to enrollment and class schedule.
- Certain expenses for a special-needs student.
- Qualified apprenticeships costs 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. Check the U.S. Labor Department’s search tool to confirm that a program is registered, and therefore, eligible for a 529 withdrawal.
There are other qualified higher education expenses for which an Ohio 529 can cover, such as:
- Up to $10,000 per child, per year from a 529 account can be used to pay for your child’s K-12 tuition at a public, private, or religious elementary or secondary school. If your child has more than one 529, the combined 529 distribution is limited to $10,000 a year.
- Payment of principal and interest on certain qualified education loans for the beneficiary of your account or any of the beneficiary’s siblings. The loan repayment provisions apply to repayments up to $10,000 per individual. This $10,000 is a lifetime amount.
- The newest tax-free 529 distribution allows any unused 529 funds to roll over to a Roth IRA for the same 529 beneficiary without incurring any penalty on the earnings. There are some requirements to use this new qualified distribution.
Save on your Ohio income taxes advantage
Did you know that when you save for your children’s or grandchildren’s college and career training with Ohio 529, you can also save on your own state income taxes?
Ohio residents can deduct up to $4,000 of their Ohio 529 contributions per child, per year, off their state income taxes. Ohio 529 also offers unlimited carry forward on your CollegeAdvantage contributions. This means that $4,000 is not a cap. If you contributed more than $4,000 to one Ohio 529account in one year, you can continue to subtract $4,000 per year, per beneficiary, from your State of Ohio taxable income until you deduct all contributions.
To better explain the unlimited carry forward of the Ohio 529 state income tax deduction, let’s use two examples. An Ohio taxpayer contributes $4,000 to two 529 accounts for each of her two children, for a total of $8,000. She could deduct a total of $8,000 from her Ohio taxable income for the year. Or, if an Ohio taxpayer contributed $8,000 to a CollegeAdvantage Direct Plan Account for one child in one year, he could deduct $4,000 from his Ohio taxable income during the current year, and the next year.
So, it’s simple: Save for your children’s and grandchildren’s education in Ohio 529; save on your Ohio income taxes.
Since 1989, Ohio 529 CollegeAdvantage has been helping families across the nation save for their children’s education after high school. Ohio 529 covers qualified costs 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 program nationwide that accepts federal financial aid. Start, add, or give a gift with as little as $25 at CollegeAdvantage.com.
