529 Plans: Education Savings and Ohio Tax Benefits
A 529 plan lets you save for education and withdraw the money free of federal income tax when you meet the qualified-expense rules. Ohio also offers a deduction for contributions, including contributions to other states’ plans.
The contribution, the account’s earnings, and the eventual withdrawal each have different tax rules. Here’s how they fit together in 2026.
The main tax benefits
| Item | 2026 rule |
|---|---|
| Federal contribution deduction | Contributions aren’t deductible on your federal income tax return. |
| Ohio contribution deduction | Up to $4,000 per beneficiary per year. Spouses share this limit, even when filing separately. Contributions above the limit can carry forward. |
| Earnings and qualified withdrawals | Earnings grow without annual federal income tax. Withdrawals are federally tax-free when matched to qualifying expenses under the applicable rules. |
| Annual gift-tax exclusion | $19,000 per donor, per beneficiary, counting other gifts to that person. |
| Special five-year gift election | Up to $95,000 per donor, or $190,000 for two spouses using both exclusions, with proper elections and reporting. |
The federal gift-tax exclusions and Ohio deduction limit serve different purposes. Neither is the plan’s maximum account balance. Plans set their own contribution limits, and there’s no federal income ceiling for contributing.
See the IRS overview of 529 plans and its 2026 gift-tax exclusion amounts.
Ohio’s deduction applies to any state’s plan
Since tax year 2023, Ohio has allowed this deduction for contributions to any state’s qualifying 529 plan. The person who contributes claims the deduction, even if someone else owns the account.
For example, assume a married couple contributes $8,000 for one beneficiary in 2026 and has no earlier contributions carried forward. They can deduct $4,000 on their Ohio return and carry the remaining $4,000 into future years, subject to the annual limit. The deduction reduces taxable income; it doesn’t reduce their tax bill by $4,000.
Contributions count in the year they’re made. For a calendar-year taxpayer, make the contribution by December 31 to use it for that year. A rollover needs separate review so the same contribution isn’t deducted twice. The Ohio Department of Taxation explains the deduction and carryforward rules.
What the account can pay for
For college or graduate school, eligible costs include required tuition, fees, books, supplies, and equipment. Qualifying computers and internet service can count too. The school must be eligible to participate in federal student-aid programs.
Actual room and board costs can qualify when the student attends at least half-time. The cap is the school’s allowance for that student’s living arrangement, or the actual charge for school-owned or school-operated housing if that amount is greater.
Federal law also allows certain K-12 expenses, registered apprenticeship costs, recognized postsecondary credentialing expenses, and limited student-loan repayments. In 2026, eligible K-12 withdrawals are limited to $20,000 per beneficiary across all 529 accounts. These uses have separate conditions. Check the state tax treatment before withdrawing.
How the five-year gift election works
The five-year election lets a donor spread a large 529 contribution across five years of annual gift-tax exclusions. It requires Form 709, even when no gift tax is due. For spouses, the contributions, elections, and any gift-splitting treatment need to be reported correctly.
Account for other gifts to the same beneficiary during those five years. If the donor dies during the period, the portion assigned to years after death is generally included in the donor’s estate.
Match withdrawals to the tax benefit
Expenses used for an education credit generally can’t also support a tax-free 529 withdrawal. Tax-free scholarships and other education assistance can reduce the expenses available for the withdrawal.
If a withdrawal isn’t qualified, its earnings portion is generally taxable and can face a 10% additional federal tax. Some exceptions remove the additional tax without removing income tax. Ohio can also require previously deducted contributions to be added back.
Before taking money out, check the expense, the student’s eligibility, and whether another tax benefit already uses that expense. IRS Publication 970 explains the federal coordination rules.