Utah State Income Tax Credit
In addition to low fees and tax-free savings, many Utah taxpayers choose to save with UESP because of the Utah state income tax credit available to them.
For the 2013 tax year, account owners who are Utah taxpayers/residents may be able to claim a credit or deduction for contributions to their UESP accounts. Individual tax filers and Utah-based trusts can claim up to $92 in tax credits per qualified beneficiary. Married filing jointly taxpayers can claim up to $184 in tax credits per qualified beneficiary. (Utah-based trusts are not eligible for a joint tax credit.) Even UESP accounts owned by Utah-based corporations can benefit from a $1,840 tax deduction per qualified beneficiary. Account owners can contribute more or less than this amount, but these figures represent the maximum contributions that qualify for the Utah tax benefit.
The more beneficiaries you own accounts for, the more you can save on your taxes. Rollovers from other 529 plans to UESP are also eligible for the tax savings. For example:
|Tax Filing Status
|Number of UESP Beneficiaries
|Contributions to Each Beneficiary's Account to Maximize the Tax Credit
|2012 UESP Tax Credit
State Income Tax Credit Qualification
Keep in mind that to qualify for the tax savings, the account must have been established before the beneficiary designated on the UESP account was age 19. If the account is eligible for the tax savings, the account owner can continue to claim the tax savings for each year’s contributions—for the life of the account. And as long as the account owner is a Utah taxpayer/resident, the account owner can claim the tax benefits no matter where the beneficiary lives—in another state or even another country. Utah account owners can even claim tax benefits when others contribute to their accounts. So it pays to encourage family and friends to make contributions to your account for birthdays, holidays, and other occasions.
Anyone can contribute to a UESP account; however, only the account owner/agent can claim tax benefits related to the account, regardless of who contributed to it, and control how the assets are invested and used.
Tax Benefits for Utah's Part-Year Residents
An apportioned amount of the UESP state tax credit can be claimed by part-year Utah taxpayers/residents—account owners who have moved into or out of Utah within the tax year or those who live in Utah only seasonally. See the Program Description for more information.
Contributing a Utah State Income Tax Refund to UESP
A Utah taxpayer/resident can select the Utah Educational Savings Plan option on the 2012 Utah state individual income tax return and have their entire Utah state income tax refund contributed to their UESP account(s). The tax credit will be applied to the tax year in which the contribution is made.
If you already have one or more UESP accounts, the refund transfer is easy—simply check the box. If you haven't yet opened a UESP account, you can also check the box, and UESP will mail you an enrollment kit. Guidelines for taxpayer refunds directed to UESP are as follows:
- If you have more than one individual UESP account, the refund will be allocated equally among all of them.
- The entire refund will be sent to UESP even if you file a joint return, and the refund will be divided equally between all individual UESP accounts for both taxpayers.
- The Utah tax refund will not be deposited in your UESP account(s) until UESP receives the funds.
Recapture of Utah Income Tax Credit or Deduction
Any previously claimed Utah state income tax credits or deductions must be recaptured when there is:
- a non-qualified withdrawal;
- a change in beneficiary from one who was younger than age 19 when designated on the account to one who is age 19 or older;
- fund transfer from an account with a beneficiary who was younger than age 19 when designated on the account to the account of a beneficiary who is age 19 or older when his or her account was opened; or
- a rollover to another 529 plan.
The addition to Utah taxable income must be added in the year when the non-qualified withdrawal, change, transfer, or rollover occurred.