Tuition, Taxes, and Timing: How to Make the Most of Your 529 Plan Right Now

As college students prepare for move-in day and parents brace for tuition payments, the 529 plan emerges once again as a financial powerhouse—not just for saving, but for proactive tax planning. Whether you’re a parent, grandparent, or even a recent graduate, there’s a strong case for giving your 529 plan another look this year.

What Is a 529 Plan?

529 plans are tax-advantaged savings accounts designed to help families cover qualified education expenses[1]. Contributions grow tax-deferred, and withdrawals used for eligible expenses—such as tuition, room and board, books, and required technology—are entirely tax-free at the federal level. Many states, including Ohio, also offer additional tax incentives to encourage funding these accounts.

State Tax Deductions and Credits

A major benefit of 529 plans is the potential for state tax deductions or credits. In Ohio, for example, you can deduct up to $4,000 per beneficiary, per year, from your state income taxes[2]. Even better, if you contribute more than $4,000 in a single year, the excess carries forward indefinitely. So even if your child is already in school, there’s still value in contributing today to claim the deduction and use those funds immediately for this semester’s expenses.

Strategic Contribution Timing

529 plan contributions follow the calendar year—not the tax year like IRAs or HSAs. This means that to claim a 2025 state tax benefit, your contributions must be made before December 31st. Making contributions in the second half of the year—especially before fall tuition payments—can be a smart way to lower this year’s tax bill while covering current costs.

Front-Loading Contributions for Maximum Growth

If you’re in a financial position to do so, front-loading contributions is a savvy strategy. The IRS allows you to make five years’ worth of gifts in one year—up to $90,000 per beneficiary in 2025 ($180,000 for married couples)[3]. This approach not only jumpstarts the compounding power of tax-deferred growth but also removes significant assets from your taxable estate without reducing your lifetime exemption.

Rollover to Roth IRA – SECURE 2.0 Expansion

Thanks to the SECURE 2.0 Act, you now have the option to roll over unused 529 funds to a Roth IRA for the same beneficiary—up to $35,000 over a lifetime and $7,000 per year[4]. The catch? The 529 account must have been open for at least 15 years, and the beneficiary must have earned income in the year of the rollover. Still, this change offers a tax-smart exit plan for families worried about overfunding the account.

Flexibility for K-12 and Student Loans

The uses for 529 plans extend beyond college tuition. You can also use up to $10,000 annually per student for K-12 tuition. Additionally, a lifetime total of $10,000 per borrower can be used to repay qualified student loans—making the 529 plan a flexible tool for multiple phases of education planning.

Estate and Legacy Planning Opportunities

Grandparents often use 529 plans as a tax-smart legacy strategy. By contributing large sums using the five-year gift rule, they can reduce their taxable estate while still retaining control of the account. Even better, account owners can change beneficiaries at any time—allowing them to shift the benefits of the plan to younger family members or future generations if the original beneficiary doesn’t need all the funds.

Who Should Revisit Their 529 Strategy This Year?

• Parents funding current or near-term college expenses who haven’t maxed their state tax benefit
• Grandparents seeking to reduce estate size while supporting their family’s education
• High-income earners looking for tax-efficient gifting strategies
• Families unsure if all 529 funds will be used, and who want to explore Roth IRA rollover opportunities

Final Thoughts

Your 529 plan can be much more than a college savings account—it’s a flexible, tax-efficient planning tool for both short- and long-term goals[5]. Whether you’re making fall tuition payments or building a multi-generational education legacy, now is the time to review and optimize your 529 strategy.

Need help figuring out what’s best for your family? Let’s talk. We’re here to help you turn back-to-school season into a tax-smart opportunity.

[1] Saving for College – State Tax Benefits

https://www.savingforcollege.com/article/does-my-state-offer-a-529-tax-deduction

[2] Ohio Tuition Trust Authority (CollegeAdvantage)

https://www.collegeadvantage.com/

[3] IRS – Annual Gift Tax Exclusion (2025 Info)

https://www.irs.gov/businesses/small-businesses-self-employed/annual-exclusion

[4] Congress Research Service Summary of Secure Act 2.0

https://crsreports.congress.gov/product/pdf/IF/IF12203

[5] CFP Board – College Planning and Tax Strategy Insights

https://www.letsmakeaplan.org/

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