Mia participated in a qualified state tuition program for the benefit of her son Michael.She contributed $15,000.
When Michael entered college, the balance in the fund satisfied the tuition charge of $20,000.When the funds were withdrawn to pay the college tuition for Michael, neither Mia nor Michael must include $5,000 ($20,000 - $15,000) in gross income.

Question

Quizplus · Accepted Answer

This is true as qualified state tuition programs allow for contributions to be made on a tax-free basis and withdrawals used for qualified education expenses are also tax-free. In this case, the $15,000 contribution covered the tuition charge of $20,000, so there was no additional taxable income generated from the withdrawal of funds.

Mia Participated in a Qualified State Tuition Program for the Benefit