Question

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 When the funds were withdrawn to pay the college tuition for Michael, neither Mia nor Michael must include $5,000 ($20,000 - $15,000) in gross income. What was the total amount of tuition charge for Michael's college?

1) $5,000
2) $15,000
3) $20,000
4) $25,000

Answer 1

The total amount of tuition charge for Michael's college was $20,000. This was fully covered by the balance in Mia's qualified state tuition program.

Step-by-step explanation:

The total amount of tuition charge for Michael's college, given that Mia's qualified state tuition program balance covered it fully, was $20,000. This is because the balance in the fund was enough to satisfy the tuition charge when the funds were withdrawn, implying that the entire amount due for college tuition was paid by the program's balance without requiring additional out-of-pocket expenses. No gross income inclusion is necessary for the $5,000 surplus because qualified state tuition programs have tax benefits that allow for earnings to grow tax-free when used for qualified education expenses.