I've continued to grapple with our questions regarding our son's scholarship, our 529 plan, and our taxes, as it just didn't seem fair that our son or his parents (us) would have to pay taxes on a scholarship which we didn't learn about until March 2024, didn't receive scholarship funds for until March 22, 2024, and was used for January through April 2024 tuition, when the amount previously withdrawn from our 529 Plan was a Qualified Withdrawal and was re-contributed to the 529 Plan fund for which our son is a beneficiary on April 1, 2024, well within 60 days of the receipt of the scholarship funds. Here is what I found with regard to the Michigan Education Savings Program 529 Plan.
From page 31 of the SUPPLEMENT 2 DATED APRIL 1, 2024, TO THE MICHIGAN EDUCATION SAVINGS PROGRAM PROGRAM DESCRIPTION AND PARTICIPATION AGREEMENT DATED JUNE 09, 2023, AS SUPPLEMENTED:
“Refunds of Qualified Higher Education Expenses. If an Eligible Educational Institution refunds any portion of an amount previously withdrawn from an Account and treated as a Qualified Withdrawal, such amount will not be subject to federal and possibly state and/or local income tax if it is recontributed to a qualified tuition program for the same Beneficiary not later than 60 days after the date of the refund. If the amount of the refund is not recontributed within 60 days, the amount of the refund potentially may still be treated as a Qualified Withdrawal if the refund is used for Qualified Higher Education Expenses or may be treated as a Non-Qualified Withdrawal or a Taxable Withdrawal, depending on the reason for the refund. You should consult with a qualified advisor regarding how the rules apply to your circumstances.”
Would I be correct in thinking that under these circumstances, our son does not have to pay taxes on his scholarship and we do not have to file amended taxes for 2023? Any advice you can give us on how to handle this on Turbotax would be greatly appreciated.
