How You Can Afford Your Child’s College Dreams

How opening a college savings plan can help you afford your child’s college dreams and reduce your taxes.

Picture watching your child walk across the stage donning a cap and gown, accepting his or her college degree with a smile.

As a parent, this is an exciting moment to look forward to – but a scary one, too, if you’re thinking about paying for tuition, books and all the other expenses that come with a college education.

Luckily, the Michigan Education Savings Program, or MESP, makes it convenient to start saving – and there are even tax advantages to contributing to your child’s account, which probably sounds good right about now as you file your tax return.

MESP is one of the 529 college savings plans sponsored by the state of Michigan. The other is MET, which is a prepaid tuition program.

“People wonder what 529 means, but it’s simply the IRS code,” explains Jennifer Howey, senior marketing manager for MESP.

The MESP college savings plan works a lot like a Roth IRA. You contribute after-tax dollars that are invested in stocks, bonds, mutual funds and other financial vehicles. MESP has nine different investment options for you to choose from.

“When you later make a withdrawal, you aren’t taxed on the earnings of your fund as long as you use the money for qualified educational expenses,” says Howey.

The money you contribute to MESP doesn’t have to be used for tuition only. “Tuition, room and board are also qualified expenses,” Howey says. “Any required equipment for your child’s education qualifies.”

Those costly textbooks? The supplies they’ll need each semester? The pesky mandatory fees? All are qualified expenses.

There is no age or time limit for when the money must be used. If your child postpones going to college, you can leave it in the account to grow over time and withdraw the money when he or she is ready. If they decide not to go to college or get a full scholarship (let’s hope!), you can transfer the money to another beneficiary, or use it for graduate school.

If you do end up withdrawing any part of the money for non-qualified expenses, you will have to pay taxes on any earnings from the fund plus a potential penalty.

Michigan also offers families tax benefits for contributing to an MESP college savings account.

“You may be able to deduct up to $5,000 off of your Michigan state income tax if filing single, and $10,000 if filing jointly on those contributions,” Howey says.

Families wondering how their MESP savings might compare to other savings plans can also visit MISaves.com/compare to start planning and evaluate what will be their best bet.

Start planning for your child’s future by opening an account, setting a goal, and calculating your contributions. Visit MISaves.com/planning for 10 steps to setting a plan in motion and working toward that exciting moment when your child graduates college – without the scary bill.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

- Advertisement -

LATEST STORIES

Meet Up, Eat Up in Macomb County

Brought to you by the Macomb County Department of Planning and Economic Development and the Macomb Intermediate School District

Ann Arbor Shines as One of 2025’s Best Cities for Working Moms

Juggling kids, a career, a semi-clean house and a hot cup of coffee isn’t easy—but millions of moms do it every day. In fact,...

Exciting Father’s Day Events to Make Dad Feel Special

Celebrate the father figure in your life at one of these local Father's Day events.

Watch Free Movies Under the Stars at Campus Martius Park This Summer

Enjoy free outdoor movies, giveaways and family fun Fridays at Campus Martius Park in Downtown Detroit this summer.




- Advertisement -