529 distributions

Forum|Forum|3 years ago
February 15, 2023
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Michigan does not allow distributions from MI 529 for K-12 tuition and deductions for contributions while a resident there. No longer a resident of MI and took a distribution from the MI 529 to pay for K-12 tuition in NC that is current residency and allows 529 distributions for K-12 tuition consistent with the Federal guidelines. A 1099Q was issued and the question is, is the distribution taxable by MI to a non resident?

SCswedeAuthor

Correction to my earlier post, MI does allow deductions on 529 contributions while a resident of the state.

PattiF

No, the distribution is not taxable by Michigan for anyone as long as it is used for qualified expenses.

Please see this about Michigan's 529 plan.

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SCswedeAuthor

Thanks PattiF. As I understand it, Michigan is one of the 15 or so States that do not allow 529 distributions to be used for K-12 tuition payments, only Colleges etc, and they are considered non qualified for MI state taxes. Since the person is now a resident of NC and not MI (they were a resident of MI for a number of years when the contributions to the 529 were made and deducted on the their MI state tax returns) when the distribution was made and was used for NC K-12 tuitions that does allow 529 distributions for K-12 tuitions, do they have to file a non resident MI state tax return for this distribution? I'm having trouble finding any information that addresses this situation. Hope this clarifies this unusual situation. Thanks