Another wrinkle: rental income in Ohio qualifies for Ohio's Business Income Deduction (BID).
So, yes. the 529 deduction would be allowed against passive income; but taxpayer might not be able to use it because the BID already gets his taxable income to zero.
His taxable income will be zero in Ohio, but not his new state of residence. He'll pay tax on the income to his resident state and get no credit because he didn't pay tax to Ohio. So, except in the year he moves, the OH deduction (529 or BID) does him no good (unless he moves to a state without an income tax).
