While we are providing general information about the state’s 529 plan, please consult the Plan Description and Participation Agreement for more detailed information and facts about the plan.
A 529 plan is a savings plan that encourages education savings for qualified higher education expenses: college, vocational, or other post-secondary learning. 529 plan funds can also go to private high school or K-12 tuition at a qualified tuition program.
Unlike a traditional savings account or bank account, your money grows tax-deferred in a 529 account and qualified distributions are federal tax and state tax free.
Different states have different state plans with different investment options and different tax benefits. They will also have different minimum contribution (and subsequent contribution) requirements and plan fees. You are not required to open a 529 plan in your home state. You can open a 529 plan in any state that accepts out-of-state enrollments. Additionally, 529 plan accounts can be linked to the Upromise rewards service. Earn an extra $25 bonus when you connect a 529 account to your Upromise profile.
Oklahoma has two state plans: the Oklahoma 529 College Savings Plan and Oklahoma Dream 529.
The Oklahoma College Savings Plan (OCSP) is a direct-sold plan with fees ranging from 0.35% – 0.78%. TIAA-CREF Tuition Financing, Inc. is program manager for the OCSP 529.
The Oklahoma College Savings Plan has no residency requirement and is available to any state residents, not just Oklahoma. It has a minimum contribution of $100 and offers a variety of portfolio options.
The Oklahoma Dream 529 Plan is an advisor-sold savings program managed by Fidelity Investments. Plan fees range from 0.91% 2.47% and participation is open to residents of any state. It has a minimum contribution amount of $250 and offers 18 different portfolios to choose from. Though it has higher fees, it comes with the guidance of a financial expert.
To find out more information about the state of Oklahoma’s 529 plans, visit www.ok4saving.org.
What are some Oklahoma 529 plan benefits and tax advantages?
Funds you invest in a 529 plan grow tax-deferred. And funds that the student eventually withdraws from the plan towards qualified educational costs are free from federal taxes.
A common misconception is that these 529 plan assets will disqualify your child from financial aid. On the contrary, 529 plan funds are treated more favorably in the financial aid formula than other savings in your child’s name through a custodial account such as an UTMA/UGMA. This is because assets in a child’s 529 plan belong to the parent not child, and FAFSA (Free Application for Federal Student Aid) gives preferential tax treatment to assets belonging to a student’s parent versus the student.
If your child is an Einstein or football star, and manages to score a free ride to school, you can still repurpose those funds. You can take out an amount equal to all scholarship funds fromm the 529 plan without incurring the 10% penalty tax fee you’d normally have to pay on funds not going to qualified education costs. (You would have to pay regular ordinary income taxes on earnings, but there would be no penalty. Alternatively, you can leave the funds in a 529 plan to be used at a later date by this beneficiary or a direct relative of the original beneficiary.)
And for many, a 529 plan can be used to transfer wealth. Contributing to a 529 plan lets grandparents or other contributors reduce the size of their taxable estate while helping them fund a grandchild’s or family member’s education. It’s even possible to make five years worth of contributions in a single year, up to $75,000 (or $150,000 for married couples) and still get the gift tax exclusion.
Is a 529 plan tax deductible in the state of Oklahoma?
Yes, Oklahoma residents can claim a state tax deduction of up to $10,000 per year for single filers or $20,000 per year for joint filers. These deductions have a 5 year carryforward. Carryforwards can be made until you reach the plan’s contribution maximum, or the five-year timeframe has elapsed.
For more information about how any state benefit or how your state income taxes may be impacted, consult the advice of qualified professionals.
What happens to an Oklahoma 529 Plan if not used?
There is no time in which the funds within an Oklahoma 529 plan need to be withdrawn. Unused funds can remain in the account and continue to grow tax-deferred.The account owner may also choose to change the beneficiary, without penalty, to another individual with a social security number who is a member of the original beneficiary’s family and a United States citizen. This is not limited to immediate family members; funds can be transferred to cousins, nieces, nephews, and other close relatives. The account owner can close the account if not used, but funds in the account will be subject to federal and state income tax as well as a 10% penalty on the account earnings.
And as outlined earlier in this article, 529 plans allow the account owner to withdraw the amount a beneficiary receives in scholarships without incurring the 10% penalty.
Keep in mind that having leftover or unused funds in an Oklahoma College Savings plan is uncommon. A 529 plan can be used for a variety of qualified education expenses, including tuition, books, room and board, lab fees, and other student fees.
Can an Oklahoma 529 Plan lose money?
Yes, a 529 plan is an investment plan with different types of investment options. The investment options offer different levels of market risk.
Speak with a qualified financial advisor about your financial goals and different investment portfolio options.
Do I need an Oklahoma 529 Plan for every child?
You don’t need an Oklahoma 529 plan for each child but you may find it easier to administer if you do. You can only have one named beneficiary on an Oklahoma 529 plan. The risk and mix of equities to fixed income of certain investment options is determined by the age of the beneficiary. For this reason, you may want to have a different 529 plan for each child.
You may be interested to know that multiple people can open accounts for the same beneficiary.
Can an Oklahoma 529 plan be used to pay off student loans, apprenticeships, and K-12 private schools?
Oklahoma 529 plans can be used to pay tuition at K-12 private schools and to pay student loans up to $10,000 annually. 529 plans can also be used to pay for registered apprenticeship programs.
How do financial aid and scholarships affect an Oklahoma 529 plan?
A 529 plan can affect financial aid, but the impact is dependent on the account owner and their tax situation, not the beneficiary.
If the account is held by the parent or guardian of the student, funds within are considered parental assets. The Expected Family Contribution (EFC) calculation for parent assets is a maximum of only 5.64% versus 20% for the students assets.However, if the 529 plan is held by a grandparent or extended family member, while the assets are not taken into account for the FAFSA EFC, distributions from these accounts qualify as student income, which is assessed at 50%.
529 accounts do not affect merit-based scholarships. Other scholarships may depend based on the school.
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529 Plan Basics by State
Check out these College Savings: 529 Plan Basics by State
Western 529 Plans
- Alaska 529 Plan
- California 529 Plan
- Colorado 529 Plan
- Hawaii 529 Plan
- Idaho 529 Plan
- Montana 529 Plan
- Nevada 529 Plan
- Oregon 529 Plan
- Washington 529 Plan
- Utah 529 Plan
Southwest 529 Plans
Midwest 259 Plans
Northeast 529 Plans
- Connecticut 529 Plan
- Delaware 529 Plan
- Maine 529 Plan
- Maryland 529 Plan
- Massachusetts 529 Plan
- New Hampshire 529 Plan
- New Jersey 529 Plan
- New York 529 Plan
- Pennsylvania 529 Plan
- Rhode Island 529 Plan
- Vermont 529 Plan
- Washington DC 529 Plan
Southeast 529 Plans
- Alabama 529 Plan
- Arkansas 529 Plan
- Florida 529 Plan
- Georgia 529 Plan
- Kentucky 529 Plan
- Louisiana 529 Plan
- Mississippi 529 Plan
- North Carolina 529 Plan
- South Carolina 529 Plan
- Tennessee 529 Plan
- West Virginia 529 Plan
- Virginia 529 Plan
- Virginia 529 Plan Basics
- Georgia 529 Plan Basics
- Alabama 529 Plan Basics
- 529 College Savings Plan: Basics
- Nebraska 529 Plan Basics
- Indiana 529 Plan Basics
- What is Homeschooling and How to Do It
- Alaska 529 Plan Basics
- Ohio 529 Plan Basics
- New Hampshire 529 Plan Basics
- Pennsylvania 529 Plan Basics
- Louisiana 529 Plan Basics