Oklahoma 529 College Savings Plan

Frequently Asked Questions - Tax Considerations

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What are the federal and state tax advantages?
When you contribute to OCSP, your account earnings have the opportunity to grow federal and Oklahoma income tax-deferred until withdrawn. The earnings portion of any withdrawals used to pay for qualified higher education expenses will be free from federal and Oklahoma income tax. This federal income tax-free treatment of qualified withdrawals and other federal tax benefits are permanently in place for 529 plans through the passage of the Pension Protection Act of 2006.

Is there a Oklahoma income tax deduction?
The amount you contribute to OCSP can be deducted from your Oklahoma taxable income up to a maximum of $10,000 per year ($20,000 for couples filing jointly). Any amount of a contribution made after 2004 that is not deducted by the taxpayer may be carried forward as a deduction from income for the succeeding five (5) years, subject to the annual maximum deduction on contributions. Amounts transferred from another 529 college savings plan are also eligible for the Oklahoma income tax deduction. Amounts deducted may be subject to recapture if a non-qualified withdrawal or rollover distribution is taken (depending on the timing of these transactions), with different adverse Oklahoma income tax treatment of non-qualified withdrawals versus rollover distributions. Read the Disclosure Booklet carefully. 

Extended Tax Deduction Filing Deadline - For taxable years beginning after December 31, 2005, the state income tax deduction filing deadline for the Oklahoma College Savings Plan contributions has changed from December 31 to April 15 of the following year or the due date of the taxpayer's state income tax return, excluding extensions.

What are the federal estate and gift tax benefits?
Contributions to OCSP may help you reduce the taxable value of your estate. Contributions to OCSP, together with all other gifts from the account owner to the beneficiary, may qualify for an annual federal gift tax exclusion of $12,000 per donor, per beneficiary for 2008. If an account owner's contribution to an OCSP account for a beneficiary in a single year exceeds $12,000, the account owner may elect to treat up to $60,000 of the contributions, or $120,000 for joint filers, as having been made over a period of up to five years for federal gift tax exclusion.

Are contributions to OCSP federal tax deductible?
No, contributions to OCSP or any 529 plan are not deductible for federal income tax purposes.

How are withdrawals for qualified higher education expenses taxed?
If you are taking a withdrawal to pay for qualified higher education expenses of the beneficiary, there will be no federal or Oklahoma income tax. Use the Withdrawal Request form (PDF, 81KB).

How are withdrawals for non-qualified expenses taxed?
If funds are withdrawn for a purpose other than to pay for qualified higher education expenses (except in the event of a beneficiary's death, disability, scholarship or attendance at a military academy), or they are treated as withdrawn (for example, if an ineligible beneficiary is named), there will be a 10% additional federal tax on the earnings portion of the distribution.

For Oklahoma tax purposes, a non-qualified withdrawal will result in state and federal income taxation on the earnings portion of the distribution.

What is the Generation Skipping Tax?
Transfer of funds or a change in beneficiary is subject to the Generation Skipping Tax (GST) if the new beneficiary is two or more generations below the prior beneficiary. If transfer is subject to GST, tax is imposed on the prior beneficiary. Account owners should consult their own tax advisors for guidance when considering a change of beneficiary or a transfer to another account.

What is the "sunset provision" and how does it affect the federal income tax treatment of 529 Plans?
The Sunset Provision as it affects the federal tax-benefits of qualified withdrawals on 529 plans is no longer a concern. The Sunset Provision is the provision of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) that states that the law allowing federal income tax-free qualified withdrawals is set to expire December 31, 2010.  (Federal income tax-free treatment of qualified withdrawals and other federal tax benefits are permanently in place for 529 plans through the passage of the Pension Protection Act of 2006.) For more information, see the Oklahoma College Savings Plan Disclosure Booklet and Participation Agreements   (PDF, 561KB).


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Don't forget you can set up an Automatic Contribution Plan (PDF, 50KB) or use Payroll Deduction (PDF, 45KB) for your contributions (if offered by your employer).

Access our glossary for the meanings of terms used throughout this site.

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The tax information contained on the OCSP Web site is not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding tax penalties that may be imposed on the taxpayer. It was written to support the promotion of the products and services addressed in the Web site. Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor.

The Oklahoma College Savings Plan (OCSP) is administered by the Board of Trustees of the Oklahoma College Savings Plan. TIAA-CREF Tuition Financing, Inc. (TFI) serves as Program Manager. TFI's affiliate, TIAA-CREF Individual & Institutional Services, LLC, is the distributor.

The investment approaches described are not recommendations and do not take into consideration personal goals or preferences. After evaluating information you consider important in making an investment choice, the ultimate decision is up to you. It is a good idea to revisit your investment strategy periodically as your goals, personal financial situation, and market conditions change.

Consider the investment objectives, risks, charges and expenses before investing in the Oklahoma College Savings Plan. Please call toll-free 1-877-654-7284 for a Disclosure Booklet containing this information. Read it carefully.

Before investing in a 529 plan, you should consider whether the state you or your designated beneficiary reside in or have taxable income in has a 529 plan that offers favorable state income tax or other benefits that are only available if you invest in that state's 529 plan.

The State of Oklahoma, its agencies, TIAA-CREF Tuition Financing, Inc., Teachers Insurance and Annuity Association of America and its affiliates do not insure any account or guarantee its principal or investment return. Account value will fluctuate based upon a number of factors, including general market conditions.

The OCSP Web site is for informational purposes only, and does not constitute an offer to sell or solicitation of an offer to buy any security that may be referenced on the site. Such offer or solicitation can be made only through the Disclosure Booklet.

The OCSP Web site contains links to other Web sites. Neither OCSP nor TIAA-CREF Tuition Financing, Inc. and its affiliates are responsible for the content of those other Web sites. The accuracy of information on those sites cannot be confirmed.

© 2008 TIAA-CREF Tuition Financing Inc.