CollegeAdvantage 529 Plan Doubles Income Tax Deduction
The CollegeAdvantage 529 plan provides users with many benefits when it comes to saving for college. Investment options, tax deferred and tax-free withdrawals and compound interest are just some the highlights of the plan. (Plus, Ohioans have an added bonus. When you invest in a 529 plan you can claim an additional deduction on your state taxable income for contributions to the 529 plan!) For the last 17 years, the maximum yearly deduction was set at $2,000 per account, but with the New Year comes a new maximum deduction.
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The CollegeAdvantage 529 plan hasn’t seen too many changes in some time, but on Jan. 1, 2018, the state income tax deductions for contributions made to a 529 plan was doubled from $2,000 to $4,000. With this significant increase, the 529 plan provides even more assistance for Ohioans who are looking to maximize their college savings efforts.
Keep In Mind…
Many people think the deduction limit is a contribution cap, but this is not the case. Those who contribute more than $4,000 per year are actually able to advance their deduction to their Ohio adjusted income tax for the following tax years until all of their contributions have been deducted in full.
Furthermore, a single recipient’s account limit for contributions has increased to $462,000. This limit is determined based on the sum of the current average cost of tuition and current average cost of room and board required for seven years at the five highest cost-eligible colleges in the United States. Once a person’s contributions hit this limit, no further contributions can be made to any account with the same recipient listed within the CollegeAdvantage program.
Finally, as you may have heard the GOP recently passed monumental tax legislation. In doing so, the usefulness of 529 savings plans were effectively expanded to help users offset more than just traditional higher education costs. Individuals can now withdraw up to $10,000 a year to use for public, private or religious elementary or secondary school expenses.
Start Now
Start saving for future college expenses as soon as possible. Every dollar you save now means you’ll have to borrow less in the future. The 529 plan is a great option to avoid high student loan debt.
Get started today. Click here to set-up a CollegeAdvantage account. This savings opportunity can be a great way to reduce your tax liability, email Rea & Associates to learn more about the program and how it will impact your personal tax planning strategy.
By Lisa Beamer, CPA (New Philadelphia Office)