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529 Ohio state deduction vs Utah plan

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  • Avatar chrisg202 
    Participant
    Status: Physician
    Posts: 64
    Joined: 01/16/2016

    Hi all
    I recently moved to Ohio. I was investing for my kids in Utah 529 plan.
    Ohio offers up to $4,000 tax deduction for beneficiary… basically $50/1000 totaling $200 tax deduction for each beneficiary.

    I know that both have Vanguard funds

    I’m not sure if it’s worth to switch to Ohio 529 or should I stick to Utah
    Thank you in advance

    #220564 Reply
    ENT Doc ENT Doc 
    Participant
    Status: Physician
    Posts: 3515
    Joined: 01/14/2017

    Hi all
    I recently moved to Ohio. I was investing for my kids in Utah 529 plan.
    Ohio offers up to $4,000 tax deduction for beneficiary… basically $50/1000 totaling $200 tax deduction for each beneficiary.

    I know that both have Vanguard funds

    I’m not sure if it’s worth to switch to Ohio 529 or should I stick to Utah
    Thank you in advance

    Click to expand…

    You should absolutely switch, or at the very least start to contribute to Ohio’s 529.  Careful if you utilized any Utah tax benefit and any recapture.  If that’s not an issue then Ohio will give you a $4,000 tax deduction per beneficiary per year, for both contributions and rollovers (double check this but I’m fairly certain it applies to rollovers as well), any excess of which can be rolled to future years for the deduction.

    The Ohio 529 expense ratios for your US total stock, total international, and total bond funds aren’t anything to write home about – hover around 0.2% – but Utah’s ERs are typically HIGHER than 0.2%.  The state fee alone is 0.2% for Utah, last I checked.  So you gain on lowered costs, and you gain on a tax deduction.  Win, win.  Not sure what you meant by $50/1000.  You can contribute (or roll over) up to $4,000 per beneficiary per year, but any excess gets no tax benefit, aside from using it in future years and that whole tax free growth/withdrawal thing.

    #220586 Reply
    Liked by chrisg202
    Avatar chrisg202 
    Participant
    Status: Physician
    Posts: 64
    Joined: 01/16/2016

    Hi all
    I recently moved to Ohio. I was investing for my kids in Utah 529 plan.
    Ohio offers up to $4,000 tax deduction for beneficiary… basically $50/1000 totaling $200 tax deduction for each beneficiary.

    I know that both have Vanguard funds

    I’m not sure if it’s worth to switch to Ohio 529 or should I stick to Utah
    Thank you in advance

    Click to expand…

    You should absolutely switch, or at the very least start to contribute to Ohio’s 529.  Careful if you utilized any Utah tax benefit and any recapture.  If that’s not an issue then Ohio will give you a $4,000 tax deduction per beneficiary per year, for both contributions and rollovers (double check this but I’m fairly certain it applies to rollovers as well), any excess of which can be rolled to future years for the deduction.

    The Ohio 529 expense ratios for your US total stock, total international, and total bond funds aren’t anything to write home about – hover around 0.2% – but Utah’s ERs are typically HIGHER than 0.2%.  The state fee alone is 0.2% for Utah, last I checked.  So you gain on lowered costs, and you gain on a tax deduction.  Win, win.  Not sure what you meant by $50/1000.  You can contribute (or roll over) up to $4,000 per beneficiary per year, but any excess gets no tax benefit, aside from using it in future years and that whole tax free growth/withdrawal thing.

    Click to expand…

    Thank you

    state taxes is 5% in Ohio, so it’s $50 deduction per $1,000 contribution

    #220602 Reply
    ENT Doc ENT Doc 
    Participant
    Status: Physician
    Posts: 3515
    Joined: 01/14/2017
    Splash Refinancing Bonus

    It’s still a deduction of $X. The tax savings is 5% of $X up to $4000.

    Also, don’t forget about the municipal tax:

    https://www.tax.ohio.gov/ohio_taxes.aspx

    #220605 Reply
    Liked by chrisg202, Peds
    Faithful Steward Faithful Steward 
    Participant
    Status: Financial Advisor, Small Business Owner
    Posts: 516
    Joined: 06/12/2017

    Expenses are slightly higher in the Ohio 529 Plan. However, the fact that Ohio only offers tax deduction for contributions to their home state plan will probably offset the slightly higher expenses.

    A couple of things to keep in mind if you’re considering rolling over your Utah plan to Ohio:

    • In the Ohio 529 Plan, contributions, including rollover contributions, to a Ohio 529 plan of up to $4,000 per beneficiary per year (any filing status) are deductible in computing Ohio taxable income, with an unlimited carryforward of excess contributions.
    • However, in the Utah plan, outbound rollovers are subject to the recapture of prior state tax deductions or tax credits.

    Michael Peterson, CFP® | Faithful Steward Wealth Advisors
    https://ProsperousPhysician.com | (717) 496-0900

    #220672 Reply
    Andrew Musbach Andrew Musbach 
    Participant
    Status: Financial Advisor, Small Business Owner
    Posts: 39
    Joined: 10/19/2017

    Adding one more point of clarification on the rollover contributions – remember the rollover deduction is based on your principal (initial contribution) and can only be done once per year without a penalty. For example, if you contributed 3k to a Utah 529 plan and it is now worth $4k, you would only be eligible for a deduction of $3k in OH if you rolled it over.

    Andrew Musbach, CFP® | [email protected]
    MD Wealth Management, LLC | http://www.mdwmllc.com

    #220680 Reply

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