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
• 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 penalty tax—but you are free to make that choice.

In cases of a beneficiary's death, disability, receipt of a scholarship, or attendance at a military academy, the earnings will be subject to federal and state income tax, but you will not have to pay the additional 10% federal 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 adviser with any questions about whether specific expenses are considered qualified higher education expenses.