The ONE BIG BEAUTIFUL BILL is done.
Yes, it’s really called that, so my repeating it doesn’t necessarily mean I think that it is beautiful, though it is undoubtedly big.
There’s a lot going on in the bill and I’m still working through a lot of the implications as I finish up my coursework to become an Enrolled Agent with the IRS this summer, but thanks to an inquiry from a friend and client about 529s I felt compelled to focus on them for today’s newsletter.
I haven’t been a fierce promoter of 529s as a way for parents to save for their kids.
That’s usually because I want people to prioritize maximizing their cash flows and reducing current income tax so they can adequately save for their own retirements.
But 529s have been a good way to defer taxes and reduce state income tax while saving for your kids’ education – if you have enough cash flow to justify it.
They’re an even better way for higher-earning and higher-taxed family members (primarily grandparents) to help their kids and grandkids out while enjoying some tax relief.
The ONE BIG BEAUTIFUL BILL has made some enhancements to 529s that make them even more attractive, especially if you’re a grandparent who wants to heed Proverbs 13:22, “A good man leaves an inheritance to his children’s children”.
Why a 529 Plan Reflects Good Stewardship
A 529 plan is a tax-advantaged way to leave a legacy for your grandchildren’s education while easing the financial burden on their parents. Here’s how it works and why it’s a wise choice:
- Tax-Deferred Growth: This is the single best part of a 529. Your contributions to this account grow free from federal and Ohio state income taxes. That growth would otherwise be subject to capital gains tax. This preserves more of your wealth for your grandkid’s future.
- Tax-Free Withdrawals: Combined with tax-deferred growth, withdrawals can also avoid taxation if they’re used for qualified education expenses, and more and more expenses are qualified now which maximizes the impact of the gift for homeschooling, K-12 schooling, or college costs.
- Ohio Tax Deduction: 529 contributions are not deductible on federal income taxes, but in Ohio (and many other states like Indiana) there are income tax deductions or credits available. As an Ohio resident, you can deduct up to $4,000.00 per grandchild per year. If you contribute more than $4,000.00 you can carry forward the excess to deduct in future years.
- Flexible Giving: 529 plans now support a range of educational paths: homeschooling, college, vocational schools, private schools, etc. which makes them ideal for your grandkids unique callings.
New Benefits For Homeschooled Grandkids
Many Christian families are opting to homeschool as a way to prioritize their kids education. The ONE BIG BEAUTIFUL BILL made 529 plans even more valuable for homeschoolers starting in 2026. Now qualified withdrawals include expenses for:
- Curriculum & Books
- Homeschool Co-op Tuition & Tutoring
- Technology & Online Resources
- Special Needs & Testing
And there’s been an increase to the amount that you can withdraw every year for K-12 expenses from $10,000 to $20,000 per year. This means that most gifts can probably be used immediately in the year given. The benefit is that you can get a state income tax deduction on money you gifted to your grandkids to pay for their homeschool expenses even if they use them right away.
Supporting College & Beyond
If your grandchildren are called to college, a trade-school, or a vocational path, a 529 is versatile enough to support these journeys too.
- College Costs: Tuition, books, fees, supplies, and room and board at accredited institutions are covered.
- Workforce Training: Now 529 funds can cover apprenticeships and non-degree credentials for those students who aren’t called to college.
- Long-Term Impact: Funds that aren’t used for K-12 or homeschooling can remain in the account and grow tax-free for future education or be transferred to a different beneficiary.
A Tax-Smart Way to Bless Your Family
Gifting to a 529 plan not only supports your grandchildren but also helps your children by reducing their education expenses. At Demland Wealth, we know you value tax strategies that allow you to give more generously.
How much did you pay in state income tax last year? The Ohio 529 deduction, combined with federal tax-deferred growth and tax-free withdrawals, ensures your wealth is used efficiently, leaving more for charitable giving to your church, ministries, or other causes close to your heart.
How to Get Started with a 529 Plan
Ready to make a lasting impact? Here’s how to begin:
- Select a 529 Plan: Ohio’s CollegeAdvantage 529 Plan is an excellent choice, but you can contribute to any state’s plan and still claim Ohio’s $4,000 deduction. Visit https://www.collegeadvantage.com to learn more.
- Make Your Gift: Contribute any amount—a one-time gift or regular deposits. Even small contributions grow significantly over time.
- Claim Your Ohio Deduction: Deduct up to $4,000 per grandchild per year on your Ohio taxes, with carryforward for larger gifts, reducing your tax burden.
- Coordinate with Your Children: Ensure the 529 account is set up for your grandchild and that withdrawals align with qualified expenses, especially for homeschooling starting in 2026.
- Partner with Demland Wealth: Our team specializes in tax-efficient strategies rooted in a biblical worldview. We can help you integrate 529 gifting into your wealth plan, ensuring you maximize your legacy for both family and faith-based causes.
Not A Magic Bullet, But Another Tool In the Tool Box
Using a 529 isn’t always the best tool. It can add some complication to your financial plan. But if you want to help your kids homeschool your grandkids and get a state tax benefit on money you may have been gifting anyway, then a 529 might make a lot of sense for you.
If you paid a significant amount of state taxes last year and anticipate the same in the future and if you are trying to minimize those taxes while maximizing the impact of your wealth on your family, this may be a wise move.