Oklahoma 529 Basics

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 to encourage saving for qualified education expenses: college/university, technical college, graduate school, professional schools and other post-secondary learning. 529 plan funs can also be used for K-12 tuition, apprenticeship costs and student loan repayment.

Unlike a traditional savings account or investment 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 and Oklahoma Dream 529.

Oklahoma 529 is a direct-sold plan with fees ranging from 0.00% – 0.51%. TIAA-CREF Tuition Financing, Inc. is the Plan Manager for Oklahoma 529.

Oklahoma 529 has no residency requirement and is available to residents of any state, not just Oklahoma. It has a minimum contribution of $25 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 about Oklahoma’s 529 plans, visit www.oklahoma529.com.

What are some Oklahoma 529 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. 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 from 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 $85,000 (or $170,000 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 carry forward. Carry forwards 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 Oklahoma 529 if not used?

There is no time in which the funds within Oklahoma 529 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 eligible family member. The new beneficiary must have a valid SSN or taxpayer ID number. 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 the earnings portion of the account funds will be subject to tax as well as a 10% federal penalty.

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 Oklahoma 529 is uncommon. A 529 plan can be used for a variety of qualified education expenses, including tuition, books, room and board, computers/tablets and related technology expenses, lab fees and other required student fees.

Can Oklahoma 529 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. Oklahoma 529 does offer an investment option that seeks to preserve capital and provide a stable return, the Guaranteed Option.

Speak with a qualified financial advisor about your financial goals and different investment portfolio options.

Do I need an Oklahoma 529 account 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 year your beneficiary will begin using the funds. 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 Oklahoma 529 be used to pay off student loans, apprenticeships, and K-12 private schools?

K-12 withdrawals are limited to $10,000 per year for K-12 tuition. Apprenticeship programs must be registered and certified with the Secretary of Labor under the National Apprenticeship Act. Student loan repayment subject to a lifetime limit of $10,000 per individual when using a 529 plan.

Withdrawals for tuition expenses at a public, private or religious elementary, middle, or high school, registered apprenticeship programs, and student loans can be withdrawn free from federal and Oklahoma income tax. If you are not an Oklahoma taxpayer, these withdrawals may include recapture of tax deduction, state income tax as well as penalties. You should talk to a qualified professional about how tax provisions affect your circumstances.

How do financial aid and scholarships affect Oklahoma 529?

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. Beginning in the 2024/25 school year, grandparent-held 529 plans will be assessed at a maximum of 5.64% and not as a student asset.

529 accounts do not affect merit-based scholarships. Other scholarships may depend based on the school.

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