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U.Plan Savings Qualify for New Tax Deduction

Contact:
Martha Savery, Director of Public Affairs
msavery@mefa.org
617.224.4813

BOSTON – Families saving for college in the U.Plan Prepaid College Tuition Program are now eligible to seek a new state income tax deduction. The annual U.Plan enrollment period runs from May 1st to June 30th and is the period when families can open and deposit savings into a U.Plan account, which qualifies for the college savings tax deduction.

“The college savings tax deduction is just one more reason why the U.Plan is a great way to save for college. The U.Plan is a safe investment that is guaranteed to keep pace with the future cost of higher education by locking in future tuition at today’s rates,” said Martha Savery, Director of Public Affairs at MEFA, the Massachusetts Educational Financing Authority.

MEFA is the state’s authority on planning, saving, and paying for college. It administers the U.Plan program, as well as the U.Fund College Investment Plan, and the low-interest MEFA Loan programs.

The new tax deduction allows taxpayers to claim up to $2,000 per married couple for money deposited in the U.Plan and the U.Fund. The college savings tax deduction was signed into law by Governor Charlie Baker last summer for the 2017 tax year.

During the annual U.Plan enrollment period, families deposit money saved for college that is used to purchase Tuition Certificates backed by Commonwealth of Massachusetts general obligation bonds. Upon maturity, the Tuition Certificates can then be redeemed to attend any one of the 78 participating Massachusetts public and private colleges and universities.

For example, one U.Plan family opened an account with $5,000 on the birth of a son, which at the time equaled 100% of a year’s tuition and mandatory fees at a state university. When the son enrolled at the state university 18 years later, he owed no additional money even though tuition and mandatory fees had grown to $13,000 per year.

When establishing a U.Plan college savings account, there is no requirement to pick a college or university from among the network of 78 participating public and private institutions in Massachusetts. If the child attends a college outside of the U.Plan network, the savings are returned to the account owner along with interest compounded annually.

Important features of the U.Plan include:

  • Earnings are exempt from state and federal tax.

  • There are no program, application, or enrollment fees, so every dollar saved by a family goes toward paying for college.

  • Depositing savings into the U.Plan is permitted only during the annual enrollment period (May 1  - June 30, 2017) and the minimum investment is $300 per maturity year.


For more information on the U.Plan, call (800) 449-MEFA (6332) to speak with a U.Plan specialist or visit mefa.org/uplan

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About MEFA

MEFA is a not-for-profit state authority, not reliant on state or federal appropriations, established under Massachusetts General Laws, Chapter 15C. MEFA's mission, since its founding in 1982, has been to help Massachusetts students and families access and afford higher education and reach financial goals through education programs, tax-advantaged savings plans, low-cost loans, and expert guidance. Recently, MEFA's mission has been enriched through its statutory designation to establish and administer the ABLE Savings Plan, created to help individuals with disabilities save for disability-related expenses. For more information about MEFA visit mefa.org.





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