Utah Educational Savings Plan

How Funds Can Be Used

Qualified Higher Education Expenses

Funds in your Utah Educational Savings Plan (UESP) account can be used for qualified higher education expenses at any eligible educational institution, which generally includes any accredited public or private college, university, or technical school in the United States or abroad that participates in federal financial aid programs for students. For more information on eligible educational institutions, visit fafsa.ed.gov.

In general, qualified higher education expenses currently include:

  • tuition and fees
  • books, supplies, and equipment required for enrollment or attendance
  • computers, related equipment and services, and Internet access 
  • room and board for students who are enrolled at least half-time
  • expenses for special-needs services in the case of a special-needs beneficiary that are incurred in connection with such enrollment or attendance

What if?

UESP allows you the freedom to withdraw funds anytime. However, if the money is used for anything other than a qualified higher education expense, in most cases the earnings will be subject to federal and state income taxes (including a recapture of any previously claimed Utah state income tax credits or deductions) and a 10% federal tax penalty—but you are free to make that choice.

In cases of a beneficiary's death, disability, receipt of a scholarship (up to the amount of the scholarship), or attendance at a U.S. service academy, the earnings will be subject to federal and state income tax, but you will not have to pay the additional 10% federal tax penalty. Likewise in such cases, Utah residents are not required to recapture previously claimed Utah state income tax credits or deductions unless such a withdrawal was made before February 26, 2010 (the effective date that Utah state legislation eliminated the recapture requirement).

Account owners should consult their tax advisor with any questions about whether specific expenses are considered qualified higher education expenses.

Recontribution of Funds

If a student withdraws from school due to unforeseen circumstances and receives a refund of qualified higher education expenses (e.g., tuition) that had been paid with 529 savings, the account owner can recontribute the funds into the same account. The funds would not be deemed a nonqualfied withdrawal, or be subject to any taxes or tax penalties. The money must be redeposited within 60 days of the date of the refund, and the recontribution cannot exceed the amount of the refund. It is recommended that account owners keep a receipt of refunds in order to have documentation of the amount of the refund and the date it was issued.