With the 2016 income tax filing deadline looming, members of the Senate Finance Committee are mulling a timely measure that would quintuple the maximum income tax deduction Ohioans are allowed for contributions to federally approved college savings plans and disability expense accounts.
Senate Bill 5 would raise the maximum income tax deduction to $10,000 per individual account.
Joint sponsors of the measure — Republican Sens. Jay Hottinger and John Eklund of Newark and Chardon, respectively — say the move primarily allows contributions to the college savings plan to keep up the pace of ever rising cost of education.
Eklund explained to committee members during a recent committee hearing that SB 5 applies to the CollegeAdvantage 529 Plan and Achieving a Better Life Experience, or ABLE, accounts, which provide for the futures of Ohio’s subsequent generations.
He offered the example of an Ohio woman who currently deducts the maximum annual contribution of $2,000 for each of her three children — a total of $6,000 — from her federal adjusted gross income to calculate her Ohio income taxes.
“SB 5 aims to increase that amount to $10,000,” Eklund said. “With the example from above, maximum contributions for three children, when this legislation passes ,would result in a $30,000 Ohio deduction.”
Hottinger said not only would the bill’s passage make it easier for Ohio families to save for their children’s college, but the state should see a return on offering the tax savings.
“The investment Ohio would make into our students under SB 5 helps ensure our workforce is prepared for the future because it is estimated that in 2020, 64 percent of new jobs in Ohio will require a postsecondary education,” Hottinger told committee members. “The bill also seeks further returns by establishing the Joint Committee on Ohio College Affordability, which is a 10-member, bipartisan committee, composed of legislators who will study and recommend additional initiatives to make college more affordable.”
According to analysis provided by the Ohio Legislative Service Commission, the committee would be required to consult with the Chancellor of Higher Education and representatives from colleges and universities.
A year after the bill’s effective date, the committee would be required to submit a report on its findings and recommendations to the governor and General Assembly.
Upon completion of the sole requirement, the committee would disband, the commission noted in its analysis.
Hottinger said including the state’s nascent ABLE program in the bill made sense.
“SB 5 will build on the success of this program and alleviate some of the financial burden associated with raising a child with a disability,” the lawmaker said.
A pair of senators joined the joint sponsors to cosponsor the measure.
SB 5 had not been scheduled for further hearing as of publication.