Get the home-field tax advantage.

Transcription

1

2

3 Get the home-field tax advantage. The Utah Educational Savings Plan (UESP) was created by the Utah State Legislature in 1996 as the state s official nonprofit 529 plan. Right now, tens of thousands of people are saving for college with UESP. Many Utah residents find UESP attractive not only because it helps them prepare for the future costs of college but also because of the associated Utah state income tax benefits. Utah state income tax benefits For the 2014 tax year, account owners can claim a Utah state income tax credit for their UESP contributions up to $1,860 per qualified beneficiary for single filers and trusts or $3,720 per qualified beneficiary for joint filers. Even Utah-based corporations that own UESP accounts can benefit from a $1,860 tax deduction per qualified beneficiary. The more beneficiaries you have, the more you can save Utah state income tax benefits per qualified beneficiary You can contribute more or less than these amounts, but they represent the maximum contribution amounts within a calendar year that qualify for the Utah state income tax benefit. Tax Filing Method Maximum Contribution Eligible for Tax Credit Tax Credit Percentage Maximum Utah State Income Tax Credit Single $1,860 X 5% $93 Joint $3,720 X 5% $186 Trusts $1,860 X 5% $93 = = = Maximum Utah State Income Tax Deduction Corporations $1,860 Tax benefits from other contributions Utah account owners can claim tax benefits for contributions others make to their accounts. So it pays to encourage family and friends to contribute to a beneficiary s UESP account for birthdays, holidays, and other special occasions. Who s eligible for tax credits? To be eligible for the Utah state income tax credit, the beneficiary of the UESP account must be designated as such before age 19. As long as the account owner is a Utah taxpayer, he or she can claim the tax benefits no matter where the beneficiary lives. Rollovers from other 529 plans to UESP are also eligible for the tax benefits. College Diploma 1

4 More tax benefits Earnings on investments in UESP accounts grow tax deferred from federal and Utah state income taxes. This means that if the funds are used for qualified higher education expenses of the beneficiary at an eligible educational institution, you will not have to pay federal and Utah state income taxes on those earnings. Choices and flexibility UESP offers 14 investment options. Utah taxpayers Minimum Contribution Requirement who invest in the Public Treasurers Investment Fund are charged no asset or maintenance fees. For those Utahns who invest in one of the other 13 options, UESP waives the $15 annual maintenance fee. There are also no mandatory initial or ongoing contributions you can open your account with a zero balance and start saving when it s right for you. Gift and estate-planning advantages Funds you contribute to a 529 plan are immediately removed from your taxable estate yet remain in your control. A special provision for 529 plans allows you to contribute up to $70,000 in a year for each beneficiary ($140,000 if married filing jointly) without paying gift taxes; this will count as your gift to the beneficiary for the next five years. Consult with your tax or estate-planning adviser to learn how this election would affect you. Some of the lowest fees around UTAH RESIDENTS ENJOY THE BENEFITS OF SAVING WITH UESP Enrollment Fee $0 Maintenance Fee $0 Asset Fees for the Public Treasurers Investment Fund Investment Option Minimum Balance Requirement Low fees, combined with federal and Utah state income tax benefits, help put more of your investment dollars to work. Some of UESP s administrative asset-based fees are as low as 0.16 percent annually. For Utah residents invested in the Public Treasurers Investment Fund investment option, there are no fees. 0% None None UESP Rated a Gold 529 Plan by Morningstar [UESP] continues to be among the leaders in reducing costs.... The plan s flexible suite of investments and low costs continue to earn it a Gold rating. Morningstar Analyst Kathryn Spica, CFA Morningstar Names Best 529 College-Savings Plans for 2013, October

5 Why start now? Higher education for your loved one may seem a long way away. But the earlier you begin to save, the longer your dollars can work for you. Funds you invest when a child is a one-year-old will have more than 15 years to potentially increase. Choose how to invest. Assumes a 5% annual rate of return compounded monthly and no initial contribution. This chart is to be used for illustrative purposes only. UESP offers 14 investment options, allowing you to choose your own investment strategy. Underlying investments include Vanguard and Dimensional mutual funds,* the Public Treasurers Investment Fund, and an FDIC-insured investment. The IRS only allows one investment option change per calendar year for the same beneficiary. Age-based investment options UESP s four age-based investment options generally offer higher exposure to equity funds while your child is young and automatically shift to fixed-income funds and/or an FDIC-insured investment as your child approaches college-enrollment age. Static investment options UESP s eight static investment options remain in their stated underlying investments as your beneficiary ages. They include equity funds, fixed-income funds, the Public Treasurers Investment Fund, and an FDIC-insured investment. Customized investment options UESP s two customized investment options allow you to create your own investment allocation using any combination of the available underlying investments. Customized age-based or static, it s up to you. For more details on UESP s investment options and underlying investments, read the Program Description included in this kit or available at uesp.org. Neither UESP nor your account is a mutual fund, and you will not own shares in the Vanguard or Dimensional funds, the Public Treasurers Investment Fund, or the FDIC-insured accounts. Although the investments in UESP are considered municipal fund securities, neither UESP nor the investments in UESP are registered with the Securities and Exchange Commission (SEC) or with any state securities agency. Investments are not guaranteed by UESP, the Utah State Board of Regents, the Utah Higher Education Assistance Authority (UHEAA), or any other federal or state agency. However, FDIC insurance is provided for the FDIC-insured accounts. Read the Program Description for more information about FDIC insurance. *Vanguard is a trademark of The Vanguard Group, Inc. Dimensional is a trademark of Dimensional Fund Advisors. 3

6 Frequently asked questions What is a 529 plan? 529 plans are tax-advantaged investment vehicles designed to encourage individuals to save for the future costs of a higher education. They were authorized by Congress under Section 529 of the Internal Revenue Code of 1986, as amended. What can the savings be used for? Funds saved in your UESP account can be used for your beneficiary s qualified higher education expenses, including tuition and fees; required books, supplies, and equipment; and even certain room and board costs. The funds can be used at any college, university, or technical school in the United States or abroad that participates in federal financial aid programs for students, not just at institutions in Utah. (See fafsa.ed.gov for a list of eligible schools.) Who can be a beneficiary of a UESP account? Any U.S. citizen or resident alien with a valid U.S. Social Security or Taxpayer Identification Number can be the beneficiary of a UESP account. Parents can save for children, grandparents can save for grandchildren, and uncles and aunts can save for nieces and nephews. You can even open an account for yourself or the neighborhood kid who mows your lawn. Who gets the tax benefits? The person who owns the account is eligible to claim tax benefits for contributions to the account. If someone other than the account owner contributes to the account, only the owner can claim the tax advantages. Multiple people can open accounts for the same beneficiary, but there can only be one account owner on each account. What if circumstances change? Say your daughter gets a scholarship, your son goes into the military, there is a family emergency, or you simply change your mind. You can transfer the account to a member of the beneficiary s family. You can also withdraw your funds anytime. If the funds are used for anything other than qualified higher education expenses, in most cases you ll have to pay federal and state income tax on the earnings and an additional 10 percent federal penalty tax on the earnings. Also, Utah taxpayers may be required to recapture any Utah state income tax credit or deduction previously claimed. What are the minimum and maximum contribution amounts? There is no minimum contribution you can open your account with a zero balance and there are no ongoing contribution requirements. With UESP, you contribute what you want, when you want. UESP will accept contributions to an account until all UESP account balances for the same beneficiary total $397,000. 4

7

8