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Utah 529 Plan for College Savings

Investing

Utah 529 Plan for College Savings

College can help unlock a world of possibilities. However, having to pay for college tuition can feel like a burden long before the acceptance letter even arrives. But by using a 529 plan as an investment vehicle, you can start saving for college tuition now to launch a college career affordably later.

529 plans are tax-advantaged investment accounts that allow you to invest and grow your money to use on qualified education expenses. And the state of Utah happens to offer some of the best 529 college savings plans in the country — and it’s not just for Utah residents.

Get the rundown on Utah’s 529 plan for college savings, find out how rewards programs like Upromise can help you grow funds even faster.

What Is a 529 Savings Plan?

529 plans are tax-advantaged investment accounts used to grow money for education expenses. They come in two forms: the widely used education savings plan and the dwindling prepaid tuition plan, which is only accepted at a handful of Utah colleges.

These plans typically generate money for college through mutual funds, a shared portfolio of investments, but they can use individual funds too. Unlike retirement accounts, you can’t make pre-tax contributions to them.

Plans can also generate money through 529 rewards programs that help grow savings accounts through cashback programs.

Here’s a rundown of some of the top benefits of 529 plans and the ways they can grow your college savings:

Taxed deferred

While you can’t skirt payroll taxes to contribute to them, the money generated from a 529 plan is generally tax-free if used for qualified expenses.

Tax deductions 

You can claim a 529 plan tax deduction on your income taxes, a tax credit that enables you to contribute even more. The State of Utah offers a 5% tax credit of up to $2,070 for single filers, $4,140 for married couples in 2021.

No federal taxes

You don’t even need to mention it to the IRS on your federal taxes.

Account holder control

The beneficiary has no control over when or how much money is withdrawn from the account, or any say on investment options. The account holder has to request a withdrawal for qualified expenses or pay a penalty for a non-qualifying disbursement. So no, your student can’t blow your savings on digital currency for Fortnite or Roblox.

Accessible

You don’t have to live in Utah to manage and contribute to a 529 plan in the state.

Flexible

You don’t have to be an experienced investor to generate money from your 529 plan. But you’ll likely have general options for how aggressively or conservatively your account targets growth. The closer to college a student is, the more you’ll likely want to ease off the gas and target safer investment options.

Ground Rules on Utah 529 Plan Withdrawals, Beneficiaries and More

Neither you nor your beneficiary has to live in Utah to qualify for a 529 plan in the state. Yes, you can start a Utah educational savings plan and use it for qualified expenses in another state. However, your account will still be subject to Utah’s rules.

As flexible as 529 plans are, there are still rules regulating them.

Who can benefit:

Anyone with a Social Security number or tax identification number can be a beneficiary.

Account holder requirements:

You must be at least 18 years old to open a Utah 529 plan.

Who can contribute:

Anyone can contribute: family, friends, acquaintances — though only the account holder can claim the tax deduction.

Ways to contribute:

Contribution options include online payments, checks, money orders, income tax refunds, payroll, bank transfers and rollover funds from other accounts.

Age-based limits:

Beyond the requirement for the account holder, there are no age-based limits on Utah’s 529 plan. The student doesn’t have to use the funds in the Utah 529 plan by a certain age or before a certain amount of time has passed.

Annual contribution caps:

$15,000 per beneficiary ― you can contribute more, but you’ll be hit with a gift tax.

Lifetime contribution caps:

$510,000 total per beneficiary ― but you can contribute to someone else’s fund.

Qualified expenses:

Eligible expenses include tuition, books, fees, supplies, computer equipment, certain software, education loan repayment and room and board when enrolled in enough credit hours to be considered a part-time student. Other higher education expenses may qualify.

Non-qualified withdrawals:

For non-qualified expenses, money generated from 529 investments is subject to state income tax and a 10% penalty.

More Frequently Asked Questions about 529 College Savings Plans 

Still got a few “what abouts” lingering in your mind? As simple as it is to set up and maintain a 529 college savings plan, you’ll probably want to make sure you’re maximizing this long-term investment in higher education. Here are some more frequently asked questions:

How Do 529 College Savings Plans and Prepaid Tuition Compare?

Both are technically 529 plans. But while conventional 529 plans are becoming more popular, prepaid tuition plans are dwindling. Prepaid tuition plans are more rigid. They’re only accepted at participating schools, down to just eight institutions in Utah, and any money generated from them is only used to lock in the current rate of tuition.

Conventional 529 plans let you choose the investment vehicle you feel will serve your needs best, but prepaid plans leave the investing to the state.

How will a 529 Plan Impact Financial Aid?

529 plans may impact need-based financial aid. If one of the beneficiary’s parents is the account holder, needs-based financial aid could be decreased by up to 5.64%. If you’re both the beneficiary and account holder, that deduction could climb up to 20%.

What happens to unused money in a 529 plan?

If there’s a theme here, it’s that 529 plans are flexible. You have plenty of options for unused money in a college savings plan:

  • Roll over the money into another beneficiary’s account, including K-12 tuition.
  • If the beneficiary decides not to go to college, other forms of training, such as vocational school or apprenticeships may qualify.
  • Pay taxes on it and take the 10% penalty to use the funds on something other than education. You might break even or still come out ahead.

How to Start a 529 Plan

Knowing what it takes to start and maintain a 529 college savings plan is one thing. Making the most of it is another. But there are services that can help you maximize your investments and hit your goals. Upromise is a rewards program that offers tools and advice to help you hit your savings goals, maximize your plan’s benefits and find additional ways to save along the way.

Link your 529 account with Upromise to get rewarded for savings. You’ll get $5.29 just for joining the program and $25 if you link your account.

Upromise also offers a Mastercard, an optional debit card you can use to earn cashback on purchases, such as groceries and household items, and apply those funds to your Utah 529. It’s a force multiplier for saving for college.

Want to move the needle as soon as you launch your college savings investment plan? Give your Utah Educational Savings Plan a boost from this introductory offer from the Upromise Mastercard, backed by Barclays Bank, FDIC insured.

Need to step on the gas to grow your savings faster? Enabling the Mastercard’s roundup feature will make it easier to corral and nurture those extra dollars and cents, by rounding up charges for each purchase you make with the card.

Upromise has already helped families save more than $1 billion for college. Link up and save more today.


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