Michigan 529 Advisor Plan

 

 A Great Way To Save For College

-   You can deduct your contributions from your Michigan Income Taxes.

-   Grandparents that donate to grandchildren receive the deduction.

-   Aunts and uncles that donate to nieces and nephews receive the deduction.

-   You even get a deduction for contributing to an account for your neighbor's kid.

-   The account grows tax deferred.

-   Earnings spent on college are free from federal and state income tax.

-   Contributions to the plan are out of your estate but you still control them.

-   This makes a great birthday gift or Christmas gift.

 

Use our calculator to figure out how much you need to save for college.

 

Contact our office for more information on the MI 529 Advisor Plan or to learn how you can set up an account.

Click Here for the Highlights of the MI 529 Advisor Plan

Click Here for a Brochure on the MI 529 Advisor Plan

Click Here for Year-End Fund Performace Data as of 12-31-2010

Click Here for Month-End Fund Performance Data as of 01-31-2011

 
Tax Benefits

The MI 529 Advisor Plan offers a variety of State tax benefits to Michigan residents who invest in the MI 529 Advisor Plan.  Some of the State Tax Benefits are as follows.

 

The potential to accumulate savings faster with tax-deferred growth.

The money you earn in a 529 plan is not subject to federal or state income taxes as long as it remains in the plan.


In addition, you will not owe federal income tax or state income taxes to most states* when money is withdrawn from your 529 account and applied to qualified expenses: tuition, room and board, books, supplies, fees and required equipment at most colleges, graduate schools and universities.

 

* Sources: “A Complete Guide to 529 Plans,” Joseph F. Hurley, CPA, 2009, The Wall Street Journal, September 14, 2008.

 

Federal Estate and Gift Tax Benefits 

Contributions to a MI 529 Advisor Plan account may reduce the taxable value of your estate. For example, contributions to MI 529 Advisor Plan account, together with all other gifts from the account owner to the beneficiary, may qualify for an annual federal gift tax exclusion of $13,000 per donor ($26,000 for married contributors), per beneficiary. If an account owner's contribution to a MI 529 Advisor Plan account for a beneficiary in a single year exceeds $13,000 ($26,000 for married contributors), the account owner may elect to treat up to $65,000 of the contributions, or $130,000 for joint filers, as having been made over a period of up to five years for federal gift tax exclusion.

 

Michigan income tax deduction on contributions

  • Michigan residents can deduct contributions to the Plan from their State Adjusted Gross Income (AGI) for contributions up to $5,000 for single filers and $10,000 for joint filers. The contributor need not be the Account Owner to qualify for the deduction.
  • Note that the above deduction limits are the total deduction an individual or couple may take for the calendar year.  So for example, joint filiers may only deduct a total of $10,000 in contributions in any given year from their Michiagn income taxes. So if a couple contributed $5,000 this year to each of three children, they would only be able to deduct $10,000 of the $15,000 in total contributions. In this case, the couple might want to consider contributing $5,000 to accounts for two of the children this year and $5,000 to an account for the third child next year.
  • Contributions may be made up to December 31st to earn a deduction from Michigan income tax for the current tax year.
  • Amounts transferred or rolled over from another Section 529 plan are not eligible for a Michigan income tax deduction. 

You can find the instructions for deducting your contribution to a MI 529 Advisor account on page 14 of the 2010 Michigan MI-1040 Forms and Instrucitons booklet.

You deduct your contribution to a MI 529 Advisor account on Line 17 on Schedule 1 of the 2010 Michigan 1040. Even though the instrcuctions booklet only mention the MESP (see below), Schedule 1 clearly lists the MI 529 Advisor plan as elligible for the deduciton from Michigan taxes.

The following are the instructions for Line 17 on Schedule 1 from page 14 of the MI 1040 Instructions booklet.

Line 17: Michigan Education Savings
Program.  You may deduct, to the
extent not deducted in calculating
AGI, the total of all contributions
less qualified withdrawals (compute
the contributions and withdrawals
separately for each account) made
during 2010 by the taxpayer in the tax
year to accounts established through
the MESP, including the MAP. The
deduction may not exceed $5,000
for a single return or $10,000 for a
joint return per tax year. There are
numerous education savings accounts
available from other states and
investment companies, but Michigan
only allows a tax deduction for
contributions to accounts established
through MESP and MAP.

 

 

 

Flexible Features

Anyone May Open an Account

Parents, grandparents, relatives and friends who are U.S. citizens or resident aliens and at least 18 years of age may open an account and contribute to a MI 529 Advisor Plan account on behalf of a beneficiary. Michigan residency is not required. However, investors residing outside of Michigan should consider their own state's plan first as it may have tax advantages that are only available through that state's plan.

Naming a Designated Beneficiary

Your Designated Beneficiary must be an individual person. Almost anyone who is a U.S. citizen or legal U.S. resident with a valid social security or tax identification number, who may also include the Account Owner, can be a Designated Beneficiary. You must open a separate Account for each Designated Beneficiary. Except in limited circumstances, you cannot open more than one Account for the same Designated Beneficiary, but others can open Accounts for the Designated Beneficiary you have named.

Funds Can Be Used at Eligible Schools Nationwide

Whether your beneficiary decides to go to a private or public college or university, in-state or out-of-state, trade or graduate school, funds in the account may be used for any type of degree program at any eligible higher educational institution in the nation and many abroad, not just Michigan institutions.

Funds can be used for a Variety of Qualified Higher Education Expenses

Funds can be used for tuition, mandatory fees, books, supplies, and equipment required for enrollment or attendance; certain room and board costs, and certain expenses for "special needs" students.

Ability to Transfer to Another Beneficiary

If your beneficiary does not attend an eligible educational instituion, you may name another eligible beneficiary for your account. The new beneficiary must be a member of the previous beneficiary's family, as described in the Plan Disclosure Statement, in order to avoid having this change treated as a non-qualified withdrawal. There is no time restriction or age restriction to use the account proceeds.

Be Careful: If you originally opened an account and named the child of a friend as the beneficiary, you would not be able to change the beneficiary to someone in your family in the future should the original beneficiary not attend an eligible educational instituion and use the funds. In this circumstance, the new beneficiary would have to be in the family of the existing beneficiary.

  

Compare College Savings Plans


  COVERDELL EDUCATION SAVINGS ACCOUNT UTMA/UGMA ACCOUNT 529 SAVINGS PLAN
Contribution Limit $2,000 per student per year.
Contributor must earn less than $110,000 (single filers) and $220,000 (joint filers)
 		 None Depends on state—up to a maximum contribution limit of $235,000 per Designated Beneficiary in the State of Michigan (Including contributions in the Michigan Education Savings Program (Direct Plan) and the Michigan Education Trust)
Age Limits May contribute until child reaches age 18. Must spend assets by child's 30th birthday. May contribute until child reaches maturity at which time child assumes control of assets None—However, some state plans do have their own age and/or time limit
Tax Treatment of Withdrawals Tax-free if used for qualified expenses None (Subject to annual tax) Tax-free if used for qualified expenses
Account Control Account owner Child assumes control once he or she reaches age of maturity Account owner
Beneficiary Flexibility Flexible May not be changed Flexible. May be for the benefit of anyone, including yourself.
Effect on Financial Aid Considered to be assets of the account owner so only a small portion is considered in the aid calculation Considered to be the assets of the student and reduces financial aid Considered to be assets of the account owner, so — unless the owner is also the beneficiary —only a small portion is considered in the aid calculation.
Gift Tax Treatment May contribute $2,000 per year per child without gift tax May contribute $13,000 per year per child without gift tax May contribute $13,000 per year per child without gift tax
Estate Tax Treatment* Considered removed from donor's estate Considered removed from donor's estate Considered removed from donor's estate


*Assets placed into a 529 College Savings Plan are considered removed from the donor’s estate for tax purposes. An exception to this rule is if the Account Owner passes away and is listed as the Designated Beneficiary on the account. In this instance, the value of the account will be included in the account owner's taxable estate. You should consult a qualified tax advisor for any tax related issues involving your MI 529 Advisor Plan account.

 

 

Other Useful Links

 

MET(Michigan Education Trust)


This Web Site provides information on a separate, prepaid program for Michigan residents that offers a different set of benefits and requirements.

 

Michigan Department of Education

This State agency collects and distributes a variety of information on the quality and status of higher education in the State of Michigan.

 

U.S. Department of Education

This Web site provides information on the federal financial aid process, including eligibility requirements and eligible schools, and features the Free Application For Federal Student Aid (FAFSA). The FAFSA application must be completed in order for a college student to qualify for federal and state student grants, work-study, and loans.


College Board

This national association serves more than 7 million students and their parents. It also provides information on over 3,500 colleges and universities.