Utah Educational Savings Plan

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 2014 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 $93 in tax credits per qualified beneficiary. Married filing jointly taxpayers can claim up to $186 in tax credits per qualified beneficiary. (Utah-based trusts are not eligible for a joint tax credit.) UESP accounts owned by Utah-based corporations can benefit from a $1,860 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. Rollovers from other 529 plans to UESP are also eligible for the tax savings.

The more beneficiaries you own accounts for, the more you can save on your taxes. For example:

Utah Taxpayer
Tax filing status Single Joint Joint Joint
Number of UESP beneficiaries 1 1 2 3
Contributions to each beneficiary's account to maximize
the tax credit
$1,860 $3,720 $3,720 $3,720
2013 UESP tax credit $93 $186 $372 $558

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 Nonresidents & Part-Year Utah Residents

A nonresident is a person who is not a Utah resident but has Utah taxable income. A part-year Utah resident is a person who has moved into or out of Utah during the tax year or who lives in Utah only seasonally.

A nonresident or part-year Utah resident can only claim an apportioned amount of the Utah state income tax credit. The apportioned tax credit is based on the percentage of income the account owner earned and received in Utah of total income during the tax year. This percentage is calculated by dividing the modified Utah adjusted gross income earned (Utah state taxable income) by the account owner’s modified federal adjusted gross income. The tax credit is then multiplied by that percentage, and the result is the apportioned tax credit that may be claimed on the account owner’s Utah state income tax return.

Contributing a Utah State Income Tax Refund to UESP

A Utah taxpayer/resident can select the Utah Educational Savings Plan option on the 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 information about the plan. 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.