Michigan-Sportsman.com banner

1 - 18 of 18 Posts

·
Registered
Joined
·
9,525 Posts
Discussion Starter #1
For those of you participating in the Michigan Educational Trust, can you tell me if the contributions are deductible on your federal tax return?

I know the contributions are deductible on the Michigan tax return, but would love to have the Feds chip in their fair share! ;)
 

·
Registered
Joined
·
19,020 Posts
I signed my son up the first year that the Blanchard Ad. introduced the program (late 80's ?). No fed help then...pretty sure no fed now. I've seen the info for the program at our local library.
I made some good invests when we had a different president, but this was one of my best investments.
L & O
 

·
Registered
Joined
·
1,103 Posts
Kroppe, the 529 plans are tax deferred. Meaning you don't get an initial deduction, but earnings grow tax free. The deduction on Michigan is a bonus.
Just got back from a seminar on this. Check into a Coverdale also because there are different rules governing what is a qualified expense, i.e. computers.
 

·
Registered
Joined
·
9,525 Posts
Discussion Starter #6
L&O and idylmoments,

Thanks for your comments. The MET seems like a decent way to go, in light of tuition increases likely in the future.
 

·
Registered
Joined
·
81 Posts
Idylmoments is correct. There is no federal tax deduction, but earnings are exempt from federal taxation until disbursed. However, that is contingent upon the sunset ERGTA(?), circa 2010. If the provisions are not extended, the earnings will be federally taxed beyond that point (if you haven't used up everything by then).
 

·
Registered
Joined
·
2,957 Posts
We have invested in the 529 in addition to education IRA's for the kids. If all 4 opt for college, we could have four at school at once. Yikes! I'm hoping for scholarships, lol. We also look at it that if they want to go to college, they can chip in their fair share.:eek: We'll help get them started.:)

We're happy with both, but it's been kind of hard to judge the overall performance since not much has been doing well.
 

·
Registered
Joined
·
3,838 Posts
Kroppe:
Looks like you got the answers to your question. I would also like to suggest you take a look at the Michigan Education Savings Plan, in addition to the MET (Michigan Education Trust). They have the same state income tax advantages. There are differences between the two in their impact on financial aid considerations, flexibility, investment options and risk/reward considerations. Info on the MESP is also available at the website you posted.
If you have not committed to MET at this time, I think it is worth your time to compare them. I am using both programs for my oldest (16yo) child.
Even though you lose the state tax advantage, other states sponsor 529 plans that still allow gains to accrue tax-deferred and use investment vehicles that I find attractive. I will probably be using one of the plans offered by either New Hampshire or Nevada, maybe together with Michigan plan, for our younger (13yo) child.
Just my 2c,
Dave
 

·
Registered
Joined
·
81 Posts
A very good place to conduct research is:

www.savingforcollege.com

I agree with Dave, that you should take a good look at the 529 plan. Not sure what he meant by losing state tax advantages though (??). Your contributions to a Michigan 529 plan are state tax deductible, and taxes on earnings are deferred.

Check out the website for good info. They also have a discussion forum there, which you can search for info.

MJ
 

·
Registered
Joined
·
3,838 Posts
MJ:
Savingforcollege.com is one site that I use....good recommendation! Another site with some good info is Motleyfool.com.
In terms of tax advantage, what I was doing was comparing purchasing a plan from Michigan (either MET or MESP) to purchasing a plan from another state. The purchase price of either MET or MESP is deductable on your Michigan income tax return. If you purchase a plan offered by another state however, you CAN NOT deduct the price on your Michigan return.
IMHO, a reason to consider a 529 plan from another state is if you believe the investment options that the other state uses is likely to provide sufficiently greater returns to offset the loss of the tax advantage. Obviousely, no guarentees of which is the best approach.
Hope that makes sense.......
Dave
 

·
Registered
Joined
·
81 Posts
Ahhhh.....I see what you were saying now. It wasn't completely clear to me what you meant. Yes, you are correct.

One other small advantage above and beyond tax-deductability of the contributions within a Michigan sponsored plan is the matching gift plan. For those of you unfamiliar with this, the state will give you a one-time match of $1 for every $3 you contribute (up to $200), providedyou meet the qualifications (<$80,000 annual income, child less than a certain age, etc.
 

·
Registered
Joined
·
3,838 Posts
Rookie:
My only regret is not getting started earlier.....
 

·
Registered
Joined
·
11,470 Posts
My son is just a baby, but I'm trying to be proactive for school savings and have been looking at MET and MESP.

This thread was about the only one I could find on the subject while searching, so I thought I might dig it up.

So my question is, for all you parents out there who have partaked in 529s and/or the MET, do you have any additional positive or negative general comments now that more time has passed?

I'm sort of leaning toward doing a lump sum for 4 semesters of community college via the MET, and then starting setting some more money aside periodically via the MESP 529. Anyone doing anything similar?
 

·
Registered
Joined
·
3,400 Posts
Interestingly enough, I just had a baby and I'm in the process of setting up college funds right now. The MET isn't bad, but after my research the way to go is a Coverdale Educational IRA. You can put in up to $2000 a year like any other IRA. You have until the 15th of April to write it off on last year's taxes. Since our baby was born in 2006 I'm trying to figure out if we can still write it off for 2005.
 

·
Registered
Joined
·
9,525 Posts
Discussion Starter #17
The MET is, in fact, deductible on your Michigan tax return. See Schedule 1, line 18.

It is a fantastic deal for two main reasons - tax deductibility mentioned above, and as an insulator against tuition increases. In the past 2 years, the price for a 4 year lump sum MET contract has gone up an average of 12.2% each year. Having an MET is directly analogous to having a financial asset that grows at the rate of contract price increases. In this case, 12.2% per year. The contract price increase for 2005 vs. 2004 was 19.3%. Better than the stock market in general.

While the stock market in the past couple years has done well, it doesn't do that every year. Tuition cost increases every year like clock work, so the MET is attractive from that point of view.

The MESP is good also, as are 529 plans which can be purchased non-specific to any state or university. Bottom line is, save hard and save early. A smattering of different assets is usually good advice.
 

·
Registered
Joined
·
11,470 Posts
Thanks for the info guys. I wasn't familiar with Coverdale IRAs at all. Interesting stuff.
 
1 - 18 of 18 Posts
Top