Advanced Underwriting Consultants

Question of the Day – June 19

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question:  My client is implementing a Section 529 plan for her daughter.  What are the Illinois state income tax consequences of doing that?

Answer:  Each state takes its own position with regard to the tax treatment of Section 529 plans.  State rules may differ with regard to tax deductions and tax credits for contributions.  Likewise, rules may differ with regard to the tax treatment of distributions.

Illinois permits Illinois taxpayers to deduct contributions to Illinois’s own Section 529 program—the Bright Start program.  It does not allow Illinois taxpayers a tax deduction for contributions to other states’ Section 529 plans.

Qualified distributions from any state’s Section 529 plan are exempt from Illinois state income tax.  See this link:

http://tax.illinois.gov/LegalInformation/letter/rulings/it/2002/ig020004.pdf.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.