Ohio's College Advantage 529 Savings Plans

If You Contribute to an Ohio 529 Plan, You Can Reap Significant Tax Benefits

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529 savings plans are designed to help students, parents and grandparents save money for college or university expenses in a tax-deductible account. Any earnings on a 529 are not subject to the federal income taxes, and you will even be able to deduct contributions from Ohio taxes when you file each year. Ohio is ranked as one of the best states in the United States when it comes to college savings plans, so its residents have a lot to gain by taking advantage of this program.

If enough money is saved through this vehicle, there is less stress at admissions time about applying for financial aid or searching for scholarships. Investments made in these accounts grow free of federal and state income taxes. In addition, all withdrawals used for qualified higher education expenses are exempt from federal and state income taxes. Ohio is also one of 33 states and the District of Columbia that offer residents a tax deduction or tax credit.

Through these tax-deductible plans, family members and friends can contribute to a child's college fund, and get a tax benefit for doing so. Over the years, with regular contributions and compound interest, the plan can grow significantly to provide for the child's educational expenses. Ohio offers two 529 Savings Plan options:

  • CollegeAdvantage 529 Savings Plan: Sold directly through the state, this plan is managed and distributed by the Ohio Tuition Trust Authority. The plan offers four age-based options, which become more conservative as the student approaches college, 17 static options, which maintain the same asset allocation over time, and three cash options. Most age-based investments are comprised of a small number of Vanguard index funds.
  • BlackRock CollegeAdvantage 529 Plan: This is an advisor-sold plan, which is managed and distributed by BlackRock Investments LLC. The plan offers three age-based options, which become more conservative as the student approaches college, and 20 static options, which maintain the same asset allocation over time. The age-based options consist almost entirely of BlackRock mutual funds and exchange-traded funds and fall into three categories: conservative, moderate and aggressive.

    Overview of the Ohio College 529 Savings Plan Tax Deduction

    If you are an Ohio taxpayer, you are eligible to deduct up to $2,000 of contributions per beneficiary, per year, from your State of Ohio taxable income, with unlimited carry-forward. You do not have to be the Account Owner to deduct contributions from your State of Ohio taxable income. The benefit is per contributor or married couple. This program accepts contributions until all 529 account balances in Ohio's 529 plans for the same beneficiary reach $445,000. When you are just getting started saving for college, one benefit is that the minimum to opening a 529 savings plan in Ohio is very low. You can open an account and continually contribute with as little as $25.

    Who Can Be a Beneficiary?

    Any U.S. citizen or legal resident over 18 years old can be named the beneficiary of an Ohio 529 savings plan. You can even open an account and name yourself as beneficiary, as long as you meet the established criteria.

    Does the Beneficiary Have to Go to School in Ohio?

    Under Ohio's 529 savings plans, the beneficiary can go to any two or four-year college, regardless of whether the institution is public or private or located in Ohio, just as long as the university or college is accredited and eligible for U.S. Department of Education financial aid programs.

     If the student does not go to college right after high school, the beneficiary can still access the money later on. There is no age restriction as to when the money needs to be withdrawn. 

    If the beneficiary decides not to go to college at all, the account owner can change beneficiaries and use the 529 savings plan for another family member or loved one. Alternatively, the account owner can opt to take the money out of the plan completely; however, this option will incur significant penalties, including a 10% penalty on earnings and the need to pay income taxes on the full savings plan amount.