Federal 529 rules for 2026 allow families to use more of a 529 account for K-12 costs — up to $20,000 per beneficiary per year, and for more than tuition. Michigan is moving in the same direction. The Michigan Education Savings Program (MESP) now lists K-12 expenses among qualified uses and states that withdrawals for qualified education expenses are free from federal and Michigan income tax.
That is the current starting point. It is not the whole story. MESP still publishes a note that some withdrawals, especially K-12 tuition, may be subject to Michigan deduction recapture and tax on earnings. So the state’s direction is broader qualification, with a few items that still need a second look before money comes out of the account.
What Qualifies Under Current MESP Guidance
MESP currently describes qualified education expenses as including:
- Tuition, fees, books, supplies, and equipment at eligible postsecondary institutions
- Computers and related technology used primarily by the beneficiary at an eligible institution
- Certain additional costs for beneficiaries with special needs
- Qualified expenses connected with enrollment or attendance at a public, private, or religious elementary, middle, or high school, up to $20,000 per beneficiary per year from all 529 programs
- Curriculum, instructional materials, tutoring by approved professionals, standardized test and dual-enrollment fees, and licensed educational therapies for students with disabilities
- Fees, books, supplies, and equipment for a certified apprenticeship program
- Qualified expenses for a recognized postsecondary credentialing program
- Student loan payments, subject to the federal lifetime limit
MESP also states that investment earnings are free from federal and state tax when used for qualified education expenses.
Where Michigan Tax Treatment May Still Differ
On the same MESP pages, a footnote still says K-12 tuition withdrawals can be federal-tax-free, and that for Michigan taxpayers those withdrawals may be subject to recapture of the Michigan income tax deduction and state income tax on the earnings.
MESP is clearer on two other uses: registered apprenticeship programs and student loan repayment can be withdrawn free from both federal and Michigan income tax.
For credentialing programs and 529-to-Roth rollovers, MESP says Michigan treatment is still pending a determination by state authorities.
Practical meaning: Use MESP’s expanded qualified list. Then, if the withdrawal is K-12 tuition — or another use MESP flags as unclear — confirm the Michigan result before you distribute.
Practical Steps for Michigan Families
- Confirm the expense is on MESP’s current qualified list.
- Stay within the $20,000 annual K-12 limit per beneficiary across all 529 accounts.
- Treat K-12 tuition as the item most likely to need a Michigan tax check.
- If you previously claimed the Michigan contribution deduction ($5,000 single / $10,000 joint), ask whether recapture could apply.
- Keep invoices and the withdrawal record with your tax file.
- Review the current MESP FAQ and Program Description before taking the distribution.
Frequently Asked Questions
Can Michigan families use a 529 for K-12 costs in 2026?
Yes. MESP lists qualified K-12 expenses and the $20,000 annual limit per student.
Are qualified 529 withdrawals tax-free in Michigan?
MESP states that withdrawals used to pay qualified education expenses are free from federal and Michigan income tax. Some items, including K-12 tuition, may still have a Michigan tax cost.
What K-12 expenses does MESP list besides tuition?
Curriculum, instructional materials, tutoring by approved professionals, standardized test and dual-enrollment fees, and licensed educational therapies for students with disabilities.
Are apprenticeship or student-loan withdrawals taxed by Michigan?
MESP states those can be withdrawn free from both federal and Michigan income tax, subject to federal limits.
Should we still get advice before a K-12 tuition withdrawal?
Yes. That is the use MESP still flags for possible Michigan recapture and tax on earnings.
Who can help us apply both the new direction and the remaining caution?
Covenant Financial’s tax preparation specialists and wealth managers can review the withdrawal against current MESP guidance and your prior Michigan deductions.
Use the Broader Rules — Then Verify the Exceptions
Michigan is expanding how families can use a 529. Start with that. Then verify any item MESP still marks as possibly taxable, especially K-12 tuition, before you take the money out.
At Covenant Financial Group, our team is committed to faith-based stewardship and holistic solutions for families at every stage of life. From our experienced wealth managers, complex tax planning through our dedicated tax preparation division, to personal and commercial insurance via TFI Insurance, to coordinated strategy sessions with trusted partners in accounting and estate planning — we bring everything under one roof so you don’t have to piece it together alone.
Contact Covenant Financial to review a planned 529 withdrawal against current Michigan and federal guidance.