topic If turbotax put qualified MESP 529 withdrawal as Federal income to claim AOC, can this be entered in State "Qualified Withdrawals from a MESP, MI 529 Advisor Plan..."? in State tax filing

If turbotax put qualified MESP 529 withdrawal as Federal income to claim AOC, can this be entered in State "Qualified Withdrawals from a MESP, MI 529 Advisor Plan..."?

xxpinkravenxx — Mon, 05 Apr 2021 16:52:31 GMT

I had $2861 for qualified withdrawal from MESP 529 QTP. Turbotax reported this as income in order to claim the education AOTC. In my State taxes for Michigan, should this amount be entered in turbotax section "MESP, MI 529 Advisor Plan and/or Michigan ABLE Account Withdrawals" (for qualified withdrawal made for MESP that was included in federal income)?

Re: If turbotax put qualified MESP 529 withdrawal as Federal income to claim AOC, can this be entered in State "Qualified Withdrawals from a MESP, MI 529 Advisor Plan..."?

Hal_Al — Mon, 05 Apr 2021 17:12:24 GMT

No. It's already included in the federal AGI that transfers to the MI state return.

But, it may not be taxable on the federal return either. Room and board are qualified expenses for a 529 withdrawal (but not for a tuition credit). If the student lives at home, you may calculate actual food costs or use the school's meal allowance for on campus students, whichever is lower.

Re: If turbotax put qualified MESP 529 withdrawal as Federal income to claim AOC, can this be entered in State "Qualified Withdrawals from a MESP, MI 529 Advisor Plan..."?

xxpinkravenxx — Mon, 05 Apr 2021 18:07:46 GMT

Thank you for your response. If I can't include this amount, my refund goes down. I assume when entered it is subtracting it from my Michigan income reported/carried over from Federal because it was a qualified education expense withdrawal. Turbotax asks if it is a "qualified withdrawal included in Federal as income", which I believe it is. However, if that is true, my concern is that since it was entered as income in order to take the education credit, I'm not sure if Michigan still considers it a qualified withdrawal in this case, since I took the Federal credit.

Re: If turbotax put qualified MESP 529 withdrawal as Federal income to claim AOC, can this be ent...

DaveF1006 — Mon, 05 Apr 2021 20:58:57 GMT

No. If you claim this as a qualified in your Michigan return, this will subtract out your income on line D of your Michigan Subtractions Smart Worksheet in your return. It does not matter that you took a federal credit or not.

Re: If turbotax put qualified MESP 529 withdrawal as Federal income to claim AOC, can this be ent...

Whitstar03 — Sun, 13 Mar 2022 01:35:09 GMT

In order to take the American Opportunity Credit, $4000 of the 529 withdrawal was taxed. This generated an income of $1,161 on line 8z of Part I of the federal Schedule 1. Under the state of Michigan Turbo Tax program, it says to "enter the amount of your qualified withdrawal you made from a MESP, MI 529 Advisor Plan, that was included in your federal income." If I enter the $1,161 here, this amount is subtracted from the MI income on the Michigan Schedule 1. The AGI that transferred from the federal 1040 to the MI 1040 has this $1,161 in it. I assume for the state this $1,161 can be subtracted since it was for a qualified educational expense. Am I interpreting this incorrectly?

Re: If turbotax put qualified MESP 529 withdrawal as Federal income to claim AOC, can this be ent...

JillS56 — Sun, 13 Mar 2022 01:49:53 GMT

Yes, you are reporting this correctly. It does not matter whether you took a federal credit or not.

Re: If turbotax put qualified MESP 529 withdrawal as Federal income to claim AOC, can this be ent...

Whitstar03 — Sun, 13 Mar 2022 02:11:51 GMT

Thank you for the quick reply.