Two Republican Ohio lawmakers have introduced a bill that would raise the annual tax deduction limit for married, joint filers.
House Bill (HB) 125 sponsored by State Representatives Adam Mathews’ (R-Lebanon) (pictured above, right) and Nick Santucci (R- Howland Township) (pictured above, right) tries to increase the annual deduction limit for married, joint filers for contributions to state 529 plans and Achieving a Better Life Experience (ABLE)savings accounts as well as index the annual deduction limits to inflation.
According to ohio.gov, CollegeAdvantage, Ohio’s 529 Plan, is a simple and flexible way to save for whatever school comes after high school. The program helps Ohio families and individuals save for future education expenses tax-free.
An ABLE account allows individuals with disabilities to save and invest money without losing eligibility for certain public benefits programs, like Medicaid, Supplemental Security Income, or Social Security Disability Insurance.
Under current law, taxpayers who file individual tax returns may claim a $4,000 deduction for a contribution to a 529 plan or ABLE account. Married taxpayers who file independently may each claim a $4,000 deduction; however, married taxpayers filing jointly may only claim one $4,000 together. This bill raises the deduction limit to $8,000 for joint filers to account for the second person and remove the marriage penalty.
Additionally, starting in 2024, this proposal indexes the deduction cap to inflation. It also keeps the unlimited carry-forward provision, which enables taxpayers to make contributions that are greater than the annual deduction cap and deduct those contributions in subsequent years.
According to Santucci, this is common sense legislation.
“Reducing tax penalties on Ohioans working to be good stewards of their finances is just common sense. This legislation is a win for Ohio families,” Santucci said.
Mathews said this legislation empowers families to provide for their children’s futures.
“I am grateful to simplify the Ohio tax code and empower families to better provide for the future of their children, whether that is for college students or those with developmental disabilities,” Mathews said.
A doubling deduction cap for joint filers is permitted in many other states nationwide, including several of Ohio’s neighbors. For instance, Pennsylvania permits an individual deduction of $17,000 and a joint deduction of $34,000, whereas Michigan permits an individual deduction of $5,000 and a joint deduction of $10,000.
The representatives said that by passing this common sense and pro–family legislation, they aim to join the other states with a doubled deduction cap for joint filers and afford greater education and disability investment opportunities to all Ohioans
The Inter-University Council of Ohio, the Association of Independent Colleges and Universities of Ohio, and Ohio Treasurer Robert Sprague supports the piece of legislation.
HB 125 unanimously passed in the Ohio House Ways and Means Committee and now moves forwards for consideration on the house floor.
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Hannah Poling is a lead reporter at The Ohio Star and The Star News Network. Follow Hannah on Twitter @HannahPoling1. Email tips to [email protected]
Photo “Adam Mathews” by The Ohio House of Representatives. Photo “Nick Santucci” by The Ohio House of Representatives. Background Photo “Ohio Statehouse” by Dr Bob Hall. CC BY-SA 2.0.
