Educational Savings Plan great for you and kids

I don't want to cause a panic, but in case you didn't notice, the federal income tax filing deadline is less than 10 days away.

Then again, if you haven't already filed, maybe now is the perfect time to panic!

My wife and I don't like the super-scrunch feeling of a looming deadline, so we took care of our taxes in early March. That means we already received and spent our refund. (No, I didn't get a big-screen TV. But paying off debt sure felt good!)

As the deadline approaches, I'm sure many of you are seeking ways to reduce your tax hit. As an example, consider this e-mail from a reader who did not provide his or her name.

"Is it allowed to establish a Utah Educational Savings Plan in 2008 prior to April 15, 2008, for our daughter, and still receive a tax deduction for the 2007 tax year, and if so, is the limitation of contribution for a married couple filing jointly situation $3,300? I've not been able to find this information."

Both good questions. Before I venture an answer, allow me to give a little background on the Utah Educational Savings Plan.

The UESP is a 529 plan, named for the section of tax code that allows it. Most states offer their own 529 plans to help people save money for college for their children and grandchildren, nieces and nephews or friends, and the UESP is consistently ranked as one of the best nationwide.

The UESP does not require any minimum deposits or balances, and any adult can be an account owner. If you're a Utah taxpayer, contributing to a UESP account makes you eligible for a state tax credit. Also, the account owner will always control the money, and the funds grow tax-free as long as they are used for qualified higher education expenses.

Regarding the specifics of today's question, I contacted Diane Johnson, UESP spokeswoman.

First, the deadline issue. Diane wrote in an e-mail response that the deadline for contributions to receive a state tax deduction or credit for 2007 was Dec. 31 of last year.

As for the amount of the credit, it sounds like our reader was on target.

"The state of Utah tax credit information can be found on the UESP Web site at www.uesp.org/faq06.html," Diane wrote. "The maximum Utah taxpayer credit calculation for contributions made to UESP accounts is $1,650 in contributions multiplied by 5 percent, equaling a credit of $82.50 per beneficiary if filing singly. If filing jointly, the calculation is $3,300 in contributions multiplied by 5 percent, equaling $165 tax credit per beneficiary.