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The Ohio College Savings Plan Deduction for OH Residents

Rules for Claiming the $2,000 Income Tax Deduction for Funding an Ohio 529 Plan

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Overview of the Ohio 529 Plan Tax Deduction:

Ohio residents who contribute to an Ohio 529 Plan receive a state income tax deduction of up to $2,000 "per beneficiary," with no limit on the number of beneficiaries that can be deducted in one year. In other words, if someone contributes $2,000 on behalf of ten different beneficiaries, they'd be able to deduct $20,000 ($2,000 x 10) from their Ohio state income tax return.

Unlike many states that double the deduction for couples who file a joint return, Ohio limits the per beneficiary deduction to $2,000 per tax return, regardless of whether or not it is jointly filed. Thus, a couple who contributed $4,000 on behalf of a child would only be able to deduct $2,000 in that year. However, Ohio does permit taxpayers to carryforward excess contributions and deduct them in later years.

The Ohio 529 Plan tax deduction is an "above the line" income adjustment, meaning residents can claim it even if they do not itemize their other deductions (opting for the standard deduction). There is no income phaseout on the Ohio 529 Plan tax deduction.

Value of the Ohio 529 Plan Tax Deduction:

Ohio residents trying to decide whether to use the Ohio 529 plan or another state's Section 529 plan need to account for the potential tax savings of contributing to their in-state plan. Ohio does not currently offer a tax deduction to residents contributing to out-of-state plans.

Considering that the top Ohio income tax rate is 6.24%, each deduction of $2,000 can save a taxpayer up to $124.80 at tax time. Currently, Ohio does not offer a tax deduction for contributing to other types of college savings accounts such as a Coverdell Education Savings Account (ESA) or UTMA Custodial Account.

Claiming the Ohio 529 Plan Tax Deduction:

Residents can claim the Ohio 529 plan tax deduction on line 41 of their Ohio Form IT-1040.

Reference and Documentation:

Additional information on the Ohio 529 plan tax deduction can be found on the Ohio Department of the Revenue website and the official Ohio 529 CollegeAdvantage website.

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