COLUMBUS – As younger Ohioans groan under the sometimes staggering weight of student loan debt, state lawmakers have advanced a bill that would offer families a greater reward for saving early for the expenses of higher education.
The Ohio Senate on Thursday approved legislation that doubles the maximum income tax deduction for contributions to college savings accounts, known as 529 plans, and disability expense savings accounts.
“Ohioans will soon be able to take advantage of a little extra tax relief as they save for their children’s futures,” said Sen Jay Hottinger (R-Newark) who sponsored Senate Bill 5.
Democrats argued that the bill will not offer much relief to middle- and lower-income taxpayers.
The bill increases the maximum annual state income tax deduction on contributions to 529 plans to $4,000 from $2,000, Hottinger said.
It also applies to Achieving a Better Life Experience savings accounts – ABLE accounts – which allows to families can save for disability-related expenses.
“Saving money to care for a loved one living with a disability or to help reduce the financial burden of getting a college education can place a tremendous financial burden on families,” said Sen. Bob Peterson (R-Wash. CH). “This legislation helps families save for their children’s futures using additional tax relief and provides greater opportunity for Ohioans to achieve financial independence.”
The bill also establishes the Joint Committee on Ohio College Affordability to study and develop innovative strategies to reduce the cost of attending college in the state.
The legislation now goes to the House of Representatives for further consideration. Similar language was contained in the Senate’s version of the biennial state budget, announced earlier this week.
Under Ohio’s College Advantage 529 savings plan, contributions can be made in increments as small as $25 and earn interest that is not liable to state taxes. Funds withdrawn for education use are also tax-free.