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Michigan 529 plan qualified withdrawal getting a big refund?

I have two boys attending college paid for through the 529 plan (awesome plan).  Every year, turbotax has me input how much qualified 529 withdrawal we've had and we end up going from owing taxes to a huge refund.  the past two years the state has sent me a letter that this is not allowed and we owe money.  I'm just imputing the numbers that turbotax asks for!

 

from turbotax program:

Qualified Withdrawal

A qualified withdrawal is any amount you take out from a Michigan Education Savings Program, MI 529 Advisor Plan and/or Michigan ABLE Account to pay for qualified higher education expenses. Qualified higher education expenses include tuition, fees, supplies, certain room and board costs, books, and equipment required for college enrollment or attendance.

If any amount of a qualified withdrawal was included in your gross income you should enter that amount on this screen.

 

I put in the qualified withdrawal amount of $56,000 and it always gets rejected by the State of Michigan

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1 Best answer

Accepted Solutions
Hal_Al
Level 15

Michigan 529 plan qualified withdrawal getting a big refund?

You should not have entered anything at that screen because NO amount of a qualified withdrawal was included in your gross income (on your federal return).  Since no amount was taxable on the federal return then no amount was transferred to the state return.  By entering  $56,000 there, you're trying to deduct it twice on the state return.  It's kind of a ridiculous question because it's very  rare that that would happen. 

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3 Replies
Hal_Al
Level 15

Michigan 529 plan qualified withdrawal getting a big refund?

You should not have entered anything at that screen because NO amount of a qualified withdrawal was included in your gross income (on your federal return).  Since no amount was taxable on the federal return then no amount was transferred to the state return.  By entering  $56,000 there, you're trying to deduct it twice on the state return.  It's kind of a ridiculous question because it's very  rare that that would happen. 

Michigan 529 plan qualified withdrawal getting a big refund?

Thank you! I knew it wasn't correct but the wording always makes me want to put it in.  How would the withdrawal ever be in my gross earnings!?

Hal_Al
Level 15

Michigan 529 plan qualified withdrawal getting a big refund?

Q. How would a withdrawal ever be in my gross earnings!?

A. If it, or part of it were non qualified.  But the question specifies a "qualified" withdrawal. 

 

Like I said,  it's very rare that that would happen.  So rare, I can't think of  a case.  But, I'm not that familiar with the details. it may hinge on the MI definition of "qualified". 

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