Education is an ongoing hot-button issue in Utah. One aspect of education funding that we should be able to come together on, however, is that we are lucky to have one of the best 529 plans in the country here in the Beehive state. With its stingy administrative expense structure, low-cost Vanguard and Dimensional funds, and flexible investment allocation options, I even recommend this plan to out-of-state clients under the right circumstances.
The icing on the cake for those of us Utah residents investing in the Utah Educational Saving Plan (UESP) is that we receive a state tax credit of up to $192 per beneficiary in 2017. So for those of you Utahns who have chosen to use other vehicles, e.g. custodial accounts, to save for your kids' college expenses, it may make sense to move those balances into the UESP. However, keep in mind that other tax considerations may outweigh the state tax benefits of UESP contributions.
For Utah residents who have been sold an out-of-state 529 plan, rollovers from these plans to the UESP also qualify as contributions entitled to the state tax credit. However, only one of these rollovers is permitted per 12-month period for each beneficiary.
The tax code offers a variety of ways to save in a tax-advantaged manner for college, or to reduce the after-tax burden of your kids' educations through "tax scholarships".
About the Author
Paul Winter, MBA, CFA, CFP® is a Fee-Only financial advisor and fiduciary in Salt Lake City, UT. His independent wealth management firm, Five Seasons Financial Planning, provides professional portfolio management and objective financial planning services to individuals and families, and to their related entities including trusts, estates, charitable organizations, and small businesses. To contact Paul, please click here.