Save for College AND Save on Taxes

Save for College AND Save on Taxes

Time flies!  We all know that.  One day you’re changing a diaper and the next you are buying a mini refrigerator for the dorm room.  Make paying for that dorm room a bit less painful.

The earlier you start setting aside money for college the better.  Putting away money from day 1 of your child’s life and doing automatic deposits monthly can really add up.  Those kids will be grown up before you know it.

There is an option called a 529 Plan for saving for college. It’s a Qualified Tuition Program.

The highlights:

  • No federal tax break when contributing but growth is tax free and distributions and earnings are generally tax free when withdrawn for qualified expenses.
  • Ohio tax break of $2,000 per beneficiary PER YEAR when using the Ohio plan which is from CollegeAdvantage . Excess contributions can be carried over and deducted in future years.

NOW FOR THE EXCITING NEWS:

  • You can use the distributions for costs other than tuition: room & board, book, supplies, and equipment. Computers qualify if the computer technology is required for enrollment or attendance.
  • NEED A GIFT IDEA?  It isn’t only parents that can contribute and get the Ohio deduction. An Ohio resident can contribute for a child that isn’t on their tax return and still get the deduction.

Careful!!  There is a penalty for taking out funds and using them for non-qualified expenses.

Here is some handy IRS Q & A on Qualified Tuition Programs.

 

Linda Reinhardt

Comments are closed.