MESP tax benefit when contributing to multiple accounts but withdrawing from only one

[PattyG79]

We contributed $1,200 to each of my three son's Michigan Education Savings Plan (529) accounts. We withdrew $9,211.54 from my oldest son's account. According to MESP, we can deduct the contributions to our MESP "less any qualified withdrawals." Does this stipulation only apply to my oldest son's account? That is, can we still deduct the $2,400 from the other two boys' accounts?

[dcandmc]

This is a matter of state tax law, so it depends on what state you live in and what the tax law there allows.

[dopps]

Interesting that your state deduction apparently gets reduced by the amount of your "qualified withdrawals" for the year. This is the first I have heard of such a reduction. In most cases, and certainly here in IL, there is no such reduction. So, for example, a couple could contribute $20,000 to any combination of IL 529's (note, not to any out of state 529's), withdraw the funds the next day, and still earn the full $20,000 deduction from their IL taxable income.

So are you sure about this reduction? Seems counter-intuitive, to give a resident a deduction and then take it away for actually then using the money inside the 529.