I have a 529 account for each of two of my children who are dependents.
In 2023, I did the following:
As I am working on my taxes, Schedule M1529, has you list all of the accounts you made a contribution into for 2023 in Section 1. So, I would just list the account and contribution for my 16 year-old child since that is the only account with a contribution in 2023.
For Section 2, it asks to enter all of the withdrawals in 2023 from all accounts. Do I list the withdrawal from my 19-year-old child’s account? Or do I just list withdrawals from accounts where a contribution was made in Section 1? If I am required to list the withdrawal from my 19-year-old child’s account, then step 3 is $0 and I get no contribution subtraction.
The TurboTax question on distributions says to include distributions "..from accounts you made contributions to during the year and where you are a beneficiary or owner". However, when looking at the State of MN instructions it doesn't seem to have the "and", instead it says "either". So this would imply that I have to list my distribution from my son's account and then I get no credit for the contribution to my daughter's account.
That doesn’t seem right because once you start withdrawing funds from one child’s account as they enter college you no longer are going to qualify for the subtraction for the other child where you are still making contributions.
Please confirm how this should be reported.
For some states, including MN, the distribution could nullify the contribution. Let's go through the form together.
If your contribution was larger, you would choose between credit and subtraction. MN does limit the contribution credit and it is not allowed at all if you claim the contribution subtraction. Please see MN College Savings here.
In addition, the form has contact information at the end.