By Tim Gorrell, Executive Director, Ohio Tuition Trust Authority
April 14, 2020
April 15 is the traditional filing deadline for federal income tax returns. Due to the monumental societal changes occurring nationwide caused by COVID-19, the federal government has extended the 2019 tax filing deadline to July 15. Your state may have also adopted a new filing deadline for your state filings. Be sure to check with your state’s tax department for your 2020 state filing deadline.
If you do receive an income tax refund, there are many ways you can use the funds to bolster your finances. You can pay off debt, build up your emergency fund, and make a great contribution to a 529 college savings account.
If You Don’t Have A 529 Plan
If you weren’t able to take a state income tax deduction or credit for 529 plan contributions because you haven’t opened an account, then don’t wait any longer! Take advantage of all the tax benefits a 529 college savings plan provides and open an account today. 529 plans are a great alternative to student loan debt. For helpful information about 529 plans, visit www.collegesavings.org to review your state’s 529 plan and compare it to other programs nationwide.
These specialized higher education savings accounts offer tax-free earnings and tax-free withdrawals for qualified higher education expenses. More than 30 states offer state income tax credits or deductions for contributions made to the state’s 529 program. Savings in 529 plans can be used nationwide at two-year, four-year, vocational or trade programs, apprenticeships, as well as graduate schools. Every amount deposited into a 529 account, whether big or small, can help you reach your college savings goal.
If You Have A 529 Plan
This tax season is a great time to check on your progress toward higher education goals with your 529 account. Visit your 529 program’s website to work with the tools and calculators available there. You can determine if you need to rework your college saving goals, adjust your 529 investment options, or increase yearly contributions to take full advantage of all the 529 tax benefits. This type of account review and maintenance is especially important in light of the impact COVID-19 has had on the markets and our economy.
Take this opportunity to review your child’s time horizon to college and determine if updates need to be made to your college savings plan. If your child is young, you have more time to save and take advantage of the power of compound interest. If your child is in middle or high school, you may want to accelerate your savings.
Saving for a higher education is a forward-looking action plan. No matter the age of your child, it is never too early or too late to start saving for them.
About the author:
Tim Gorrell is the executive director of Ohio Tuition Trust Authority. For more than 30 years, Ohio Tuition Trust Authority has sponsored and administered Ohio’s 529 Plan, CollegeAdvantage. Visit CollegeAdvantage.com for more information.