Utah State Treasurer David Damschen reminded Utah residents they can give the gift of higher education this holiday season by opening or investing in a Utah Educational Savings Plan.
This gift comes with tax benefits for the giver and receiver. Money invested in a UESP plan grows tax-free and withdrawals are exempt from federal and state income tax as long as the funds are used to pay for qualified higher education expenses. And in Utah, the Utah account owner also receives a state income tax credit or deduction for their contribution.
“Adding to your child’s toy box is hard to resist, but I encourage parents to consider investing the cost of just one toy this year into a UESP account – a true investment in your child’s future,” said Treasurer Damschen. “The gift of higher education is truly priceless and no matter how little you have to invest, you can open a tax-deferred education savings account today.”
Opening a UESP account is free and does not require the help of a financial advisor. Anyone age 18 or older may open an account and there is no minimum contribution or balance requirement. Utah residency is not required and you do not need to be related to the beneficiary to open an account. Also, by going to https://gift.uesp.org/families can send invitations to others who may want to make a contribution to their UESP account.
“Studies show that children with savings dedicated for higher education are four to six times more likely to attend,” added Treasurer Damschen.
Nearly every state in the nation has a 529 college savings plan designed to encourage saving for higher education. 529 plans are sponsored by states, state agencies, and educational institutions, and authorized by Section 529 of the Internal Revenue Code.
Benefits of UESP Plans – Advantages for Account Owners and Beneficiaries
- Tax-Deferred Growth: Account earnings accumulate tax-deferred. Because you don’t pay annual taxes on account earnings, your balance can grow faster.
- Tax-Free Withdrawals: Withdrawals are exempt from federal and state income tax if the funds are used to pay for qualified higher education expenses:
- Tuition and mandatory fees
- Books, supplies, and equipment required for enrollment
- Computers and peripheral equipment, educational software, and internet access
- Room and board for students enrolled at least half-time
- Utah State Income Tax Credit or Deduction: for the 2016 tax year, a Utah individual taxpayer (or trust) who is a UESP account owner may claim a 5 percent Utah state income tax credit up to certain limits on contributions to his or her account or accounts. Utah-based corporations may claim a state income tax deduction up to certain limits.
- Enrollment is open all year and there are no age, income, or residency restrictions
- Account owners – not the beneficiary – control their accounts
- Saving is less costly than borrowing
- UESP offers 14 investment options
- An eligible educational institution generally includes any accredited public or private college, university, or vocational school where federal financial aid can be used. You can determine the eligibility of an educational institution by contacting the school or by visiting fafsa.ed.gov.
Visit www.uesp.org today to learn more.