The 2022 tax filing season is in full swing, and while it may not be the favorite time of year for most Michiganders, the refund that a majority of taxpayers will receive makes the tedious process of preparing state and federal tax returns worth the effort.
According to IRS data, federal tax refunds averaged $2,873 in 2021. Of course, that raises the question of what to do with the money.
Michigan Education Savings Program (MESP) Administrator Diane Brewer is encouraging parents, grandparents and guardians to put that money to work in an MESP account for a child or grandchild.
“Investing your tax refund in an MESP account is a smart and easy way to help plan and save for a child’s postsecondary education,” Brewer said. “Even a small ‘windfall’ like a tax refund can help accelerate the value of a current account or help kickstart a new one.”
MESP is a state-sponsored, tax-advantaged 529 college savings plan created in 2000 to help people save for the cost of higher education.
It can be used at any eligible college, university or trade school in the nation and some abroad for a variety of qualified higher education expenses, including tuition, fees, certain room and board costs, books, supplies and equipment required for enrollment.
Managed by TIAA-CREF Tuition Financing Inc. on behalf of the Michigan Department of Treasury, MESP has more than 294,000 accounts with total assets exceeding $7.3 billion.
Ranked among the nation’s best state-administered 529 college savings programs over the past decade, MESP has earned silver and gold ratings from Morningstar each year since 2012.
The investment research firm routinely gives MESP high marks for its well-researched asset allocation approach, robust process for selecting underlying investments, appropriate set of options to meet investor needs, strong oversight from the state and investment manager and low fees.
MESP offers a variety of professionally managed and flexible investment options ranging from conservative to aggressive.
In January, MESP expanded its lineup with the addition of four new funds from Vanguard: Growth Index Fund (domestic stock fund), Value Index Fund (domestic stock fund), Extended Market Index Fund (domestic stock fund) and Emerging Markets Index Fund (international stock fund).
The program now offers 22 investment options to fit a family’s life situation, risk tolerance and college savings goals.
With the cost of college increasing at a faster rate than inflation, Brewer says that MESP provides families the ability not only to invest and grow their savings over the long term, but also in a more tax-favorable manner.
MESP is one of three Michigan Section 529 plans, named after the section of the Internal Revenue Code that allowed for their creation. Each plan offers Michigan taxpayers a state income tax deduction on contributions and potential tax-free growth on earnings if account proceeds are used to pay for qualified higher education expenses.
“Whether a child is an infant or a teen, there is no better time to start planning for the future and saving for higher education than right now,” Brewer said. “And that refunded money from Uncle Sam can really help.”
More information about MESP is available at MISaves.com or 877-861-6377.
