I have a 529 account for each of two of my children who are dependents.
In 2023, I did the following:
- For the child who is 19, I made no contributions to his account and withdrew $3,000 to pay for qualified education expenses.
- For the child who is 16, I contributed $3,000 to her account and made no withdrawals.
As I am working on my taxes, Schedule M1529, has you list all of the accounts you made a contribution into for 2023 in Section 1. So, I would just list the account and contribution for my 16 year-old child since that is the only account with a contribution in 2023.
For Section 2, it asks to enter all of the withdrawals in 2023 from all accounts. Do I list the withdrawal from my 19-year-old child’s account? Or do I just list withdrawals from accounts where a contribution was made in Section 1? If I am required to list the withdrawal from my 19-year-old child’s account, then step 3 is $0 and I get no contribution subtraction.
The TurboTax question on distributions says to include distributions "..from accounts you made contributions to during the year and where you are a beneficiary or owner". However, when looking at the State of MN instructions it doesn't seem to have the "and", instead it says "either". So this would imply that I have to list my distribution from my son's account and then I get no credit for the contribution to my daughter's account.
That doesn’t seem right because once you start withdrawing funds from one child’s account as they enter college you no longer are going to qualify for the subtraction for the other child where you are still making contributions.
Please confirm how this should be reported.
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