Is Oregon 529 College Savings Plan Tax Deductible

Making The Right Selection

Taxpayers can open one, two or even all three of these savings accounts if they and their beneficiary are eligible. However, because all three savings plans are subject to gift taxes, tax planning is key.

The annual gift tax exclusion in 2021 is $15K per individual. All gifts made to an individual whether via an education savings program or otherwise will be considered for the annual exclusion. Anyone who contributes more than $15K to a single individual must file a gift tax return, and reduce their lifetime gift/estate tax exemption, which is currently $11.7M in 2021.

If you want to use a tax planning software that incorporates education savings accounts and gifts taxes, ask for a demo of our Corvee Tax Planning software today.

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The above article is intended to provide generalized financial information designed to educate a broad segment of the public it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

Oregon 529 Plan And College Savings Options

Oregon has a 529 plan called Oregon College Savings Plan that can help you save for college. Oregon also has a 529 Able Plan as well.

If you live in Oregon, these might be good options for you to save for college.

These programs are designed to help make college more affordable – so that you can get the education you need. By saving for college early on, you can make paying for college easier down the road.

If you’re not quite sure how 529 plans work, check out this starter guide to What Is a 529 Plan?

There is also a specific order of operations to save for college that we recommend families follow. These programs are specific to the State of Oregon. Each state has different rules when it comes to 529 plan savings.

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Are 529 Contributions Tax Deductible

Never are 529 contributions tax deductible on the federal level. However, some states may consider 529 contributions tax deductible. Check with your 529 plan or your state to find out if youre eligible.

A 529 plan allows you to save for college or higher education while receiving some type of tax benefit. Earnings from 529 plans are not subject to federal tax and generally not subject to state tax when used for qualified education expenses such as tuition, fees, books, as well as room and board. The contributions made to the 529 plan, however, are not deductible.

For more information about 529 Contributions, visit:

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Owners Retain Control Over Plan

With a 529 plan, the owner remains in control of the plan, and the beneficiary or student has few, if any, rights. As the owner of a 529 plan, you have the ability to change the beneficiary of the account at any time, and you can choose where and when to make distributions from the account.

Subject to the options available in your specific plan, you can choose where to invest the money in the account. If you are willing to pay taxes and penalties, you can even reclaim the balance of the account at any time without your beneficiary’s permission.

Remember, with TurboTax, we’ll ask you simple questions about your life and help you fill out all the right tax forms. Whether you have a simple or complex tax situation, we’ve got you covered. Feel confident doing your own taxes.

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What Washington Residents Should Know About 529 Plans

Washington residents have two 529 options available, the GET Prepaid Tuition Program and the DreamAhead College Investment Plan. The GET plan is only available to Washington residents, while the DreamAhead plan is open to any U.S. citizen.

While the DreamAhead plan is similar to the option available in Oregon, the GET program is a little different. Heres how it works:

• Every year, the GET program determines the price of a unit. 100 units will always equal one year of tuition. The 2019 price per unit is $121.
• You buy units at the current price and hold on to them. No matter how much the cost of tuition rises in the future, your units will always maintain their value.

Therefore, if you buy 100 units this year, you will have one year of college tuition and fees covered, no matter how prices change.

Tax Benefits Of Oregons Advisor Sold Plan

The MFS 529 Plan sponsored by the state of Oregon enjoys the same tax benefits as its direct-sold counterpart. That includes tax-deferred growth on contributions as well as tax-free withdrawals when theyre used for qualified higher-education expenses.

But remember, nonqualified withdrawals would be subject to same penalties.

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Oregon College Costs & Trends

Colleges and universities across the United States experienced increased operating costs of 2.5% in 2019. This most recent inflation figure was down slightly from the 2.9 percent increase in 2018 and 3.4 percent increase in 2017. These costs are forwarded directly to students in the form of higher tuition and living expenses. As these costs steadily rise every year, parents are looking for ways to help offset these future higher education costs.

These rising costs are hitting closer to home in Oregon as well. Oregon’s higher education costs rose by 47.7% in just the last 10 years, ranking as the 13th highest state.

The table below shows the average one-year costs in 2020 for different types of Oregon colleges and universities.

What Are My Investment Options

Oregons direct-sold 529 plan offers several portfolio options designed for various risk profiles and levels of investment knowledge. Its age-based portfolios may be appropriate for the account holder who is not familiar with the investment world and wants the portfolio to do the work for them. These portfolios automatically rebalance their asset-allocation, the mix of stock funds, bond funds and other securities, over time. When your child is young, the portfolio will aim for strong returns by investing heavily in stock funds, which are generally riskier but have the biggest potential for growth. As your child gets closer to the college years, the portfolio will shift focus to safer investments like fixed-income and money market funds.

If you have a clearer picture of what you want your investment mix to look like, you may be attracted to the plans multi-fund portfolios. The asset-allocations for these portfolios are based on different risk profiles and objectives so you can customize your plan. The mix is designed to stay constant over time. You can also invest in single-fund portfolios. These portfolios divert your money entirey to one underlying mutual fund and performance will rely solely on that fund.

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Option : Coverdell Education Savings Account

Coverdell Education Savings Accounts are tax-deferred investment vehicles designed to help families save for education. Many families elect to use Coverdell ESAs to help their children pay for college, but they can also be used for K12 education.

ESA investments grow tax deferred, and if the funds are used to pay for qualified education expenses, they wont be taxed when withdrawn.

Here are a few other important things to know about Coverdell ESAs:

• When the account is established, the beneficiary must be identified and no older than 18. There are some exceptions for older beneficiaries with disabilities.
• You can change the beneficiary to a different family member if the trust documents allow for it.
• Funds can be used to pay for higher education, primary school and/or secondary education costs, which often include tuition, books, equipment, supplies, tutoring, uniforms, transportation and internet access.
• The account owner can contribute to more than one Coverdell ESA, but they can only contribute up to $2K per year to each beneficiary.
• To receive tax-free withdrawals, all funds must be used by the time the beneficiary is 30.
• Only individuals with adjusted gross income below certain thresholds can contribute to Coverdell ESAs, but trusts and other organizations can contribute regardless of income.
• Investments in Coverdell ESAs are self-directed, which gives the account owner the most flexibility of all three education savings plans.

Oregon Saving For College Report In 2021

We discuss the tax benefits, trends, do’s and don’ts and various plan options of setting up a 529 college savings plan in Oregon

As parents, grandparents and students we know college is coming and that we’re somehow going to have to pay for it someday. Fortunately we have many options available to us including savings bonds, the stock market and 529 plans. Starting a 529 account now is always the best option, no matter how old you is. While playing the stock market may yield higher returns on your investment, placing your money into a 529 plan allows it to grow in a tax free environment. One study even found that when the federal tax benefits were taken into consideration, 529 plans outperformed their benchmarks in every category.

Oregon has it’s own state-operated 529 plan called Oregon College Savings Plan. It is important to note that your child does not have to go to a OR college or university in order to use this savings account. 529 plan funds can be used at any accredited college or university across the nation, including some K-12 private schools!

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Tax Deduction Rules For 529 Plans: What Families Need To Know

• Tax Deduction Rules for 529 Plans: What Families Need to Know

April is generally tax season . While filing and paying taxes can be painful, governments offer several deductions that can reduce a familys tax burden and increase any possible refund. Families who invest in 529 plans may be eligible for tax deductions. A 529 plan can be a great alternative to a private student loan. This article will explain the tax deduction rules for 529 plans for current and future investors.

What Are The Federal And State Tax Advantages Of Opening An Oregon College Savings Plan Account

The benefit of contributing to an Oregon College Savings Plan account is that your account earnings have the opportunity to grow tax-free and so long as the money in your account is used for qualified expenses it can be withdrawn and spent tax-free, as well.

There is also an Oregon income tax benefit. If you are a resident of Oregon, contributions made to any account in the Oregon College Savings Plan are eligible to receive a state income tax credit up to $300 for joint filers and up to $150 for single filers.

Note: Recapture provisions apply. This means that if you withdrew funds for non-qualified expenses from your Oregon College Savings Plan account and you claimed a tax benefit for that years contribution, the state of Oregon will recapture any Oregon State income tax benefits that you had accrued on the principal portion of that withdrawal. Read through our Plan Disclosure Booklet for more info.

Note, any funds that you plan to roll over from another 529 College Savings Plan are considered new contributions and may impact your taxes in a given tax year. Its best to contact a tax advisor if youre still unsure about what your tax implications might be.

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Oregon College Savings Plan

• Contact

The Oregon College Savings Plan features enrollment-based and static portfolio options utilizing mutual funds from a variety of fund families and an FDIC-Insured Option. Sumday Administration, LLC succeeded TIAA-CREF as program manager of the Oregon College Savings Plan on September 10, 2018.

Fee Score

Performance

• 2001, but substantially changed in September 2018.
• State agencyOregon 529 Savings Board, chaired by State Treasurer
• Tax deduction

Tax Benefits Of 529 Plans

For both types of 529 plans, contributions are not tax-deductible for your federal taxes although some states provide a state tax deduction for contributions. As long as you make withdrawals only to pay for qualified higher education expenses, you won’t pay income tax when you put the money to use. Qualifying expenses typically include books, tuition, mandatory fees, room and board and any necessary equipment.

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How Much Does The Oregon College Savings Plan Cost

With the exception of the guaranteed portfolio option which carries no fees, Oregons 529 college savings plan charges a total annual asset-based fee which varies depending on which portfolio you invest in. That fee factors in underlying fund expenses as well as a plan administration fee. Its not charged out of your pocket but rather factored out of your account balance each year. The total annual asset-based fees for portfolios in the plan currently range from 0.25% to 0.72%.

Comparing Education Savings Plans: Coverdell 529 & Able Accounts

Over the past few decades, education costs have skyrocketed. In 1985, average annual tuition costs at a state university were just shy of $4K, while today they exceed $20K. These costs have risen at more than twice the rate of inflation, making it increasingly difficult for families to afford college.

Fortunately, there are a few savings plans that can make paying for college a bit easier.

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Check That Url Then Check It Again

Dear Liz: It would appear you have been taken in by a scam. In a recent column, you state a free credit report may be obtained through www.annualcreditreport.com. I went to the site and filled out the information requested. Instead of receiving a credit report, it signed me up for a paid membership. I was able to cancel it but I did not receive any credit report.

Answer: AnnualCreditReport.com, which has provided free credit reports since 2005, is not a scam. Unfortunately, many people navigate to the wrong sites and wind up being pitched credit monitoring or similar products. If youre being asked for a credit card, youre not on the right site.

One problem is that people search for terms such as free credit report, annual credit report or even AnnualCreditReport.com and click on the first link that comes up, not realizing that many search engines top their results pages with paid advertisements. The actual site, annualcreditreport.com, could be halfway down the page. The better way to access the site is to either click on a trusted link, such as the one provided here, or type the full URL into the address bar of your browser.

Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the Contact form at asklizweston.com.

Note to readers: if you purchase something through one of our affiliate links we may earn a commission.

Tax Deductions Vs Penalties

The greatest benefit of 529 plans is their tax advantages. But to understand these benefits, you must understand deductions and penalties.

Tax penalties punish taxpayers for taking certain actions. Generally, they exist to discourage people from making certain financial decisions. For example, there is a tax penalty for withdrawing funds from retirement accounts before reaching a certain age.

On the other hand, tax deductions reward taxpayers under certain circumstances. Tax deductions reduce a filers overall tax liability to reward them for responsible financial choices. Two examples of deductions are income reductions for families with dependents and those paying student loan interest.

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Restrictions On Roth Iras

Dear Liz: I read your useful summary of the advantages of Roth IRAs. I recently retired and decided to open a Roth alongside my traditional IRA. I have an investment manager who will hopefully create some gains in that account. One thing that I learned is that I must wait five years before I can begin withdrawing earnings from the Roth tax-free. For this reason, it might be helpful to encourage readers to open a Roth IRA early, with at least a small contribution, to get the clock ticking toward that five-year deadline.

Answer: The five-year rule applies, as you mentioned, only to earnings, since contributions to a Roth IRA can be withdrawn at any time. Once youre at least age 59½, earnings can be withdrawn without penalty provided the Roth IRA has been open for at least five tax years.

Hopefully you were also informed about the earned income rule, which requires you to have earnings such as wages, salary or self-employment income in order to contribute to a Roth or traditional IRA. Contributing more than youre allowed to an IRA or Roth IRA can incur a 6% excise tax per year for each year the excess contributions remain in the account.

If you do have earned income say youre working part time in retirement you cant contribute more than you earn. If you earn just $5,000 in a year, for example, you cant contribute the full $7,000 thats otherwise allowed to people 50 and older.

If youve contributed in error, contact a tax advisor about next steps.