So here is my question (for tax year 2011):
If I open and fund 529 College Savings Plan, do I get federal and state (Utah) tax deduction for my contributions?
If I get a Treasury Savings Bond (Series EE/I), do I get federal and state (Utah) tax deduction?
I think they can be counted as "gifts" on the 1040 but I am not entirely sure.
Utah offers a 5% tax credit on contributions of up to $1,740 single/$3,480 joint per beneficiary (credit of $87 single/$174 joint).
Note: the link shows a list of all states which offer some kind of benefit.
Gift starts at $13K/yr per gift recipient. You can gift up to 4 years in advance for a $65K gift this year, then no gift for next four. This must be declared on your tax return, but no consequence, i.e. no tax due.
I leave this for another respondent.
All savings bonds allow you to defer taxes until you cash them in.
If the proceeds are used for qualified educational expenses, the accrued interest is exempt from federal and state income tax. When savings bonds are paying decent rates, they are the best investment out there for college. Unfortunately, in 2011, the interest rates are terrible.
Why would you get any deduction for bonds? Why would they be counted as gifts? It's an investment. The only thing you can get is tax benefits when you use the bonds for education expenses, and the interest may be tax-exempt.
See more details about the EE/I bonds on this site.
