01/30/2023 | Press release | Distributed by Public on 01/30/2023 04:31
Since the creation of 529 higher education savings accounts in 1996, the federal government has continually expanded the list of the tax-free qualified distributions for these accounts. One of the more recent 529 withdrawal distributions allows families to use 529 savings to pay for their children's K-12 tuition at a public, private, or religious elementary or secondary school. This means your education saving account with Ohio's 529 Plan, CollegeAdvantage, can cover certain costs for elementary, secondary, and post-secondary education.
There is a limit of $10,000 per year that can be withdrawn from a 529 account to pay for the K-12 tuition.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.
So why save in a 529 for your child's K-12 tuition? To take advantage of the tax benefits!
First, all earnings in a 529 account are tax-free. You can see how your 529 account can grow with compound interest and tax-free earnings. For Ohio's 529 Plan, compound interest accumulates on the original contributions as well as any additional 529 contributions, any earnings from the 529 investment options, and any accrued interest. Therefore, every dollar saved is yours to use for education expenses.
Second, all 529 withdrawals for qualified expenses are also tax-free. This K-12 tuition qualified distribution adds to the flexibility of a 529 plan to cover many education costs. Other tax-free 529 withdrawals are:
Third, there's a significant tax benefit for any Ohio resident who contributes to Ohio's 529 Plan . Whether or not you are the 529 account owner, Ohio residents can deduct their contributions to Ohio's 529 Plan from their taxable state income. The deduction amount is $4,000 per year, per beneficiary, with unlimited carry forward; Ohio is one of only three 529 Direct Plan programs nationally that offer this benefit. This means that the $4,000 is not a contribution cap for Ohioans. If an Ohio taxpayer contributes more than $4,000 in one year, they can continue to deduct $4,000 per year, per beneficiary, from their State of Ohio taxable income until all the 529 contributions have been deducted.
And there is another advantage to saving in Ohio's 529 Plan for your children's K-12 tuition. Any remaining 529 funds can then be used for their education after high school (the original intent behind 529 plans). Your Ohio 529 account can be used starting with your child's elementary education all the way through graduate school and student loan debt. There are a variety of qualified uses for a 529 plan so you can continue to save in your child's Ohio 529 account through their entire academic career and set them up for their professional career.
For more than 33 years, Ohio's 529 Plan, CollegeAdvantage, has been helping families across the nation save for their children's higher education. Ohio's 529 Plan 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. Learn, plan, and start for as little as $25 today at CollegeAdvantage.com.
Posted on January 30, 2023
Ohio Tuition Trust Authority