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Thanks to the 2017 Tax Cuts and Jobs Act, you can now use 529 savings plans to pay up to $10,000 per student per year for private, public or religious elementary, middle, and high school tuition. Some private elementary and high schools charge up to $30K per year, making the use of MESP funds a viable option to provide some tax savings.
The MESP
The Michigan Education Savings Plan (MESP) is a 529 college savings plan. The biggest benefit that the MESP offers over other savings accounts is the tax benefits. When you contribute to the MESP you are able to deduct Michigan state taxes on up to $10,000 of contributions per year. Like a Roth IRA, the funds are invested and grow for you tax-free. The MESP can then be withdrawn to pay for college costs completely tax-free. The other nice thing about the MESP is that your child can attend any school in the country and is not limited to Michigan schools.
The biggest drawback of the MESP is the restrictions on how the funds can be used. In order to get the tax benefits of the MESP, the funds must be used for college costs. However, there was a change to the MESP and other 529 plans in the most recent tax law. 529 plans, like the MESP, can now be used to pay for private elementary and high school tuition and expenses. $10,000 is the current annual cap for private elementary and high school costs that can be covered by the MESP. Any other use of the funds and there are taxes and penalties on any of the tax-free growth on the account. If your child doesn’t end up going to college or if he needs the funds to help pay for other expenses, the taxes and fees could really add up!
Can I Use Michigan MESP For High School? – ATS Advisors 2023