What is a 529 Plan?
529 plans or qualified tuition programs are a means for saving for future college costs. 529 Plans offer tax and estate planning benefits along with no income restrictions for participation and no age limit for the account holders.
Michigan provides two types of 529 Plans:
Self Directed: https://www.misaves.com/
Advisory Assisted: https://www.mi529advisor.com/
Federal Income Tax Benefits
The MI 529 plan offers income tax benefits. Although contributions are not deductible on your federal tax return, any investment earnings can grow tax-deferred, and distributions to pay for the beneficiary’s college costs come out federally tax-free.
State Income Tax Information
In addition to Federal tax benefits, there are State tax benefits as well. For MI 529 sponsored plans tax treatment is as follows:
Contributions are deductible for Michigan income tax purposes up to $5,000 per year for a single income tax return filer and $10,000 per year for joint filers. Incoming rollovers from another 529 account, however, are not eligible for the tax deduction.
Qualified Withdrawals, certain outgoing rollovers, and certain federally Taxable Withdrawals are not subject to Michigan income tax for either the account owner or the beneficiary. Michigan tax benefits related to MI sponsored 529 plans are available only to Michigan taxpayers. You should talk to a qualified advisor about how Michigan tax provisions affect your circumstances.
Estate Tax Planning Benefits
There’s another tax advantage unique to the 529 plan. There’s no federal gift tax on contributions up to $16,000 per year for single filers and $32,000 for married filers.
Always consult your tax advisor prior to making a decision that may affect your taxes.
Paradigm Equities, Inc. is registered with the U.S. Securities and Exchange Commission and the Municipal Securities Rulemaking Board (MSRB).
There is an investor brochure available to you on the MSRB website at MSRB.org that describes the protections available that may be provided by the MSRB rules and how to file a complaint with an appropriate regulatory authority.
The State of Michigan, through the Michigan Department of the Treasury offers a 529 Michigan Education Savings Program.
Michigan Income Tax Deduction
Accounts contributed by a Michigan taxpayer to Michigan Education Savings Program accounts during the tax year, less the amount of any qualified withdrawal from those accounts during the tax year, is deductible from Michigan adjusted gross income in an amount not to exceed $5,000 for a single return or $10,000 for a joint return for that tax year. Amounts transferred from or contributed to another 529 college savings account plan are not eligible for the Michigan income tax deduction.
One of the 529 plans sold by Paradigm Equities is considered an out-of-state program and does not qualify for tax benefits offered by the State of MI. Individual States provide different benefits for 529 College Savings Plans. Please consider, before investing, whether your or your designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program.
Choosing the right college savings plan is an important decision. Make sure the plan you choose provides those features and benefits that are best suited to your risk tolerance, income, investment style and investment goals. Remember, state tax deduction is only one variable to consider when investing in a college savings program, other items to consider should include: the variety of investment options, self-managed vs. pre-programmed investment options, the maximum contribution limit, contribution flexibility, investment fund performance, the program’s fees and charges, web-based planning tools, customer service, account access and transfer and distribution options.
Please consult with your financial advisor or tax consultant to determine if the benefits and features of this 529 College Savings Program or any other college savings program apply to your specific circumstances and goals.
Investments in the 529 plans are subject to market risk and there is no guarantee that funds will be sufficient to cover all college costs.
An investor should consider the investment objectives, risks, and charges and expenses associated with municipal fund securities before investing.
More information about municipal fund securities is available in the issuer’s official statement. The official statement should be read carefully before investing. To obtain an official statement, please contact MEA Financial Services at 800-292-1950.
The 529 plan sold by Paradigm Equities, offers an option to invest in a government money market fund. You could lose money by investing in this investment option. Although this particular money market fund in which your investment option invests seeks to preserve its value at $1.00 per share, the underlying fund cannot guarantee it will do so. An in vestment in this investment option is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The underlying fund’s sponsor has no legal obligation to provide financial support to the underlying fund, and you should not expect that the sponsor will provide financial support to the underlying fund at any time.