As 529 plans become increasingly popular, many people wonder if the savings plan is available in their state. Learn more about 529 plans in Utah.
In every state in the Union, 529 plans are among the best options parents have to save up for their children’s college education. Although they may seem to resemble other savings options, especially those that allow account owners to invest their contributions and collect earnings over time, 529 plans offer some unique tax advantages that make them well-suited to cover education expenses. First, though, you’ll need to figure out which of the plans offered across the nation is right for you, since parents have the option to choose from among the out-of-state offerings in addition to those at home. This means that whether you live in Utah or reside in another state and want to explore your options, you may have wondered: “Does Utah have a 529 plan?” To find out, keep reading as the 529 plan experts over at Sootchy detail Utah’s program.
As you’ve probably gathered, Utah – like every other state – does have its own 529 plan. In fact, these savings accounts are exclusively administered at the state level, despite the fact that it was Section 529 of the federal Internal Revenue Code that created the plans. Because of this independence, each state has come up with their own version (or versions) of the 529 plan, each of which carries its own benefits, limitations, and name; in Utah, the program that oversees these plans is called my529.
Given that each state’s 529 plans have their own characteristics, let’s dive into the details of the Beehive State’s plan in particular. The following are some of the defining features of Utah’s my529 program:
When opening a 529 plan for yourself or a family member, you may note that there are two kinds to choose from: those that are sold directly by a state agency and those sole through an advisor or intermediary. Plans that are direct-sold, like Utah’s my529 plan, tend to be more financially sound because they come with much lower fees, whereas advisor-sold plans typically include extra benefits like investment advice.
If you live in Utah and own one of the state’s 529 plans, you’re probably eligible for a credit on your state income taxes. Any Utah taxpayer with a my529 plan can get a 5% credit on contributions of up to $2,040 (or double that amount for joint filers), which comes out to a maximum tax credit of $102 for single filers or $204 for those filing jointly. This credit applies for all entities with a Utah 529 plan except for corporations, which can take a tax deduction instead.
The gains on any 529 plan are free from federal income taxes, and most – though not all – states exempt these plans from state taxes as well. Utah is one such example; as long as the earnings from a my529 plan go toward qualified education-related expenses, you won’t have to worry about taxes or penalties.
Typically, the investment options for a 529 plan fall into one of two categories: age-based or static. The first of these options comprises an automated portfolio that starts out with a moderate level of risk and gets more conservative as the beneficiary gets older, which helps protect any gains; Utah’s my529 plan offers this option.
Static investments, on the other hand, are directed manually by the account owner, and in Utah, those portfolios call into one of four groups: blended, equity, capital preservation, and fixed income. Depending on your financial situation and experience as an investor, you can choose from among these five options and customize your plan to suit your needs.
One obstacle to opening certain states’ 529 plans is the minimum contribution required; South Dakota, for instance, mandates an initial deposit of $1,000 to any new 529 plan. In Utah, there is no such requirement, so prospective account owners can make as large or small a deposit as they’re comfortable with when starting a 529 plan for their loved one.
If you’ve heard enough at this point and would like to open a 529 plan in Utah, the team at Sootchy makes it very easy to do so; all you have to do is download our smartphone app, and you can conveniently open, manage, or contribute to whatever 529 plan you’d like, including Utah’s. Should you choose to go it alone, however, you’ll have to take a few steps, which we’ll lay out for you below:
Those who want to take advantage of a 529 plan can pick from any number of accounts across the country, including Utah’s my529 option, so it can be tough to pick a plan and determine what you’ll need to do to start it and maximize its benefits. With help from the experts at Sootchy, you can open one of these accounts quickly and easily; download the Sootchy app and get started with your 529 plan today.