The 2023 tax filing season is in full swing — and the refund that some taxpayers will receive makes the process of preparing state and federal tax returns rewarding. It is also the time for some Michigan families to evaluate their financial situation and plan for their future.
According to IRS data, federal tax refunds averaged $3,039 in 2022. Of course, that raises the question of what to do with the money. Why not consider jumpstarting college savings with a Michigan Education Savings Program (MESP) account?
Michigan families can score big at tax time with the MESP’s triple tax benefits:
State Income Tax Deduction
Individual taxpayers may deduct up to $5,000 in MESP contributions each year from their Michigan-adjusted gross income, and taxpayers filing jointly may deduct up to $10,000.
100% Tax-Deferred Growth
In addition to a state income tax deduction, any account earnings grow 100 percent tax-deferred at both the state and federal levels. This means that instead of paying taxes annually on any earnings, an account owner can potentially grow their account faster.
Tax-Free Withdrawals
Account owners can withdraw funds tax free when paying for qualified education expenses at any accredited college, university, or trade schools across the U.S. and many schools abroad. Qualified higher education expenses include tuition, fees, room and board, books, computers, related technology, and more.*
MESP Administrator Diane Brewer is encouraging parents, grandparents, and guardians to put any refund or bonus funds to work in an MESP account for a child or grandchild.
“Investing your tax refund or bonus 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 or bonus 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.
Managed by TIAA-CREF Tuition Financing Inc. on behalf of the Michigan Department of Treasury, MESP has more than 301,000 accounts with total assets exceeding $7 billion.
Ranked among the nation’s best state-sponsored 529 college savings programs, MESP is one of only two 529 plans in the nation to earn a GOLD rating from Morningstar, an investment research and management firm. Based on its 2022 analysis of 54, 529 college savings plans, MESP earned the coveted “GOLD” rating.
