By Tim Gorrell, Executive Director, Ohio Tuition Trust Authority
November 28, 2016
Ahh, the holidays — it’s the most wonderful time of the year! You’ve finally finished the Thanksgiving turkey leftovers. You joined the masses out on Black Friday and then again on Small Business Saturday. To complete all your holiday shopping, you took advantage of all the online deals for Cyber Monday.
And then you look at today, Giving Tuesday, and think, “Maybe there’s a better holiday gift I can give, one that has impact? Why not the gift of college?” Giving Tuesday marks the start of the charity giving season which lasts through all the holiday celebrations. It emphasizes meaningful offerings of your time, financial support, or talents for the benefit of others. Giving to a loved one’s 529 college savings account — or starting an account — is truly a gift that has value and significance.
What’s a 529 plan? Simply, it’s a college savings account that grows tax free, and withdrawals taken for 529 qualified higher education expenses are free from federal and state income tax. Additionally, the money in these accounts can be used at any federally accredited educational institutions – whether for a two-year, four-year, graduate or professional degree, or any other post-secondary school. College Savings Plans Network (CSPN) can show you more of the basics.
Contributions to a 529 plan can start as low as $10 or $15 and some plans don’t have a minimum contribution. Contributions can be increased to almost any amount you would like to contribute. You can even set up an automatic monthly amount to be transferred into the 529 account to show your continual support for your loved one’s college education plans. In some states, you may be eligible to deduct a portion of your 529 plan contributions from your state taxable income, provided you are a taxpayer in that state.
Per federal 529 laws, individuals can invest up to $14,000 ($28,000 for married couples) per beneficiary without incurring any federal gift-tax consequences. You can also contribute up to $70,000 per beneficiary in a single year ($140,000 for married couples making a proper election) and take advantage of five years’ worth of tax-free gifts at one time. For more information, consult your tax adviser or estate-planning attorney.
Celebrate the spirit of giving during this holiday season and contribute to a 529 account, or even start one for a loved one. If you’d like more information on your home state’s 529 college savings program and its tax benefits, you can visit CSPN’s resource page to find a link to it. CSPN also can help you compare different state-sponsored 529 plans.
After researching these tax-advantaged college savings programs, consider giving the gift of college to someone you love.
About the author:
Tim Gorrell is the executive director of Ohio Tuition Trust Authority. For more than 25 years, Ohio Tuition Trust Authority has sponsored and administered CollegeAdvantage, Ohio’s 529 College Savings Program. CollegeAdvantage now oversees more than 635,000 accounts and over $9.77 billion in assets. Visit CollegeAdvantage.com or call 1-800-AFFORD-IT (233-6734) to learn more.