Several tax benefits allow your investment to potentially grow faster.

Tax-deferred earnings

Earnings in your my529 account accumulate free from federal and Utah state income taxes. This means potential investment returns earned in your account are available to pay for the qualified higher education expenses of your beneficiary.

Important notice to non-Utah taxpayers and residents: You should determine whether the state in which you or your beneficiary pays taxes or lives offers a 529 plan that provides state tax or other benefits not otherwise available to you by investing in my529. You should consider such state tax treatment and benefits, if any, before investing in my529.

Tax-free withdrawals

You owe no federal or Utah state income tax on your investment earnings if you spend your withdrawals on qualified higher education expenses.

Important notice: Nonqualified withdrawals will be subject to the following tax consequences:

  • Federal income tax on the earnings portion of the withdrawal.
  • A 10 percent federal penalty on the earnings portion.
  • Utah residents must pay state income tax on the earnings portion.
  • Utah residents must repay any previously claimed state tax credits or deductions.
  • Consult your tax advisor with questions about whether specific expenses are qualified higher education expenses.

Utah state income tax credit or deduction

For the 2017 tax year, a Utah individual taxpayer (or trust) who is a my529 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. The maximum credit and deduction are reviewed each year and may be changed.

A Utah taxpayer may not claim Utah state tax benefits for a contribution made to an account for which he or she is not the account owner.

To claim the tax credit or deduction:

  • The beneficiary must be younger than age 19 when designated on the account.
  • If the beneficiary is younger than age 19 when designated, the account owner can claim the credit each year a contribution is made for the life of the account.

Here are the allowable 2017 tax year benefits for each designated beneficiary:

Tax Filer Utah Tax Credit 2017
Maximum Qualifying Contribution
Per Beneficiary
Maximum Utah Tax Credit
Per Beneficiary
Maximum Utah Tax Deduction
Per Beneficiary
Single 5% $1,920 $96 NA
Joint 5% $3,840 $192 NA
Trusts 5% $1,920 $96 NA
Grantor Trusts
(Filing Jointly)
5% $3,840 $192 NA
Corporations NA NA NA $1,920

The Utah state tax credits and deduction have been increased for tax year 2018. Here are the allowable 2018 tax year benefits for each designated beneficiary:

Tax Filer Utah Tax Credit 2018
Maximum Qualifying Contribution
Per Beneficiary
Maximum Utah Tax Credit
Per Beneficiary
Maximum Utah Tax Deduction
Per Beneficiary
Single 5% $1,960 $98 NA
Joint 5% $3,920 $196 NA
Trusts 5% $1,960 $98 NA
Grantor Trusts
(Filing Jointly)
5% $3,920 $196 NA
Corporations NA NA NA $1,960

Gift tax benefits

A provision of 529 plans allows you to make a lump-sum gift to a beneficiary of up to $75,000 (up to $150,000 if you are married and file a joint tax return) in one year without creating a taxable gift.

You will need to fill out IRS Form 709, which allows the gift to be treated as a series of five equal contributions (e.g., $15,000, if you contribute $75,000; $30,000, if you contribute $150,000, are married, and file a joint return).

Estate tax considerations

Generally, money held in an account is not considered part of the account owner’s estate, even though the account owner remains in control of the money.