Changes to 529 College Savings Plans

Charlie Heid interviewed on WTOL with Amanda FayA popular tool for parents trying to save for their child’s college education is now even more helpful for families. Gilmore Jasion Mahler’s Charlie Heid tackled the topic during his monthly appearance on WTOL’s “Your Day.” It’s called a “529” plan and is basically like a 401K, but it saves for your child’s education instead of your retirement. It’s an investment account that allows families to let money grow tax free to help pay for a child’s college education. It’s become a popular savings tool to ease the financial burden for parents who want to pay for their child’s college education.

The new tax law now allows families to use up to $10,000 a year in 529 funds for elementary and high school costs as well as college costs.

Some more good news is that the tax deduction you can take has also doubled in Ohio from $2,000 per child to $4,000 per child. That change was part of the budget bill passed last year in Ohio. The Michigan deduction is $5,000.

There is no annual limit for contributions to a 529 plan, but keep in mind you or a family member (like your kids grandparents) can give up to $15,000 a year (or $30,000 per married couple) to your child’s 529 account without having to pay any federal gift tax.

While these are state-run plans, you don’t have to use the 529 plan for your state. You may find you like the rate of return better on an out of state plan.

529 plans pay for college related costs (and now high school and elementary school costs) including:

  • Tuition
  • Mandatory fees
  • Room and board

Be aware, there are fees associated with 529 plans, so you need to ask questions and inquire about potential administrative fees or an application fee. Sometimes these fees can be waived, for example, if you maintain a certain balance, or agree to electronic only document delivery. Also be aware that a 529 plan could impact your child’s eligibility for financial aid based upon need.

529 plans are sponsored by states, state agencies, or sometimes educational institutions. There’s a nice website established by the National Association of State Treasurers called the College Savings Plan Network with some good information. You can search info on any state’s 529 plans.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting services and provides comprehensive services including assurance, business advisory, tax, risk advisory and healthcare management. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.

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