FAQs2016-11-09T15:19:32-06:00
Who can open an account?2016-11-09T15:19:35-06:00

A Bright Directions account can be established by an individual, certain legal entities, a custodian under a state’s UGMA or UTMA statute, or a trustee of a trust. The account owner may also be a tax-exempt Section 501(c)(3) organization or state or local government that establishes an account as part of a scholarship program. The account owner must be at least 18 years of age with a valid Social Security number or a taxpayer identification number. The account owner must also have a valid address in the U.S. (not a P.O. Box).

How do I open an account?2016-03-28T13:52:13-05:00

Your financial advisor can guide you through the steps to get enrolled.

Who can be a beneficiary?2016-03-28T13:52:31-05:00

The beneficiary is the future student and may be an individual, including the account owner, of any age. The beneficiary must have a valid Social Security number or taxpayer identification number. Each account can have one designated beneficiary.

Who can make contributions?2016-03-28T13:52:47-05:00

Parents, grandparents, or other relatives—anyone, really—can contribute to a Bright Directions account on behalf of the beneficiary. All funds contributed to the account are controlled by the account owner.

What are the Illinois state income tax benefits?2017-12-14T13:29:21-06:00

Contributions are Illinois tax-deductible up to:1

  • $10,000 per Illinois taxpayer
  • $20,000 for married Illinois taxpayers filing a joint return

December 31 deadline for contributions. To be deductible for a calendar year you must make the contribution before the end of that given calendar year. Contributions postmarked on or before December 31, will be treated as having been made in the year in which it was sent.

This deduction is available to Illinois taxpayers. In addition, investments are not subject to Illinois state income tax while in a Bright Directions account. And when withdrawn for qualified college expenses, they are not subject to federal or Illinois state income tax.2

Ask your tax professional for additional information.

1Individuals who file individual Illinois state income tax returns can deduct up to $10,000 per tax year ($20,000 if filing jointly) for their total, combined contributions to the Bright Directions College Savings Program, the Bright Start College Savings Program, and CollegeIllinois! during that tax year. The $10,000 (individual) and $20,000 (joint) limit on deductions will apply to total contributions made without regard to whether the contributions are made to a single account or more than one account. The amount of any deduction previously taken for Illinois income tax purposes is subject to recapture in the event an Account Owner takes a Nonqualified Withdrawal from an Account or if such assets are rolled over to a non-Illinois 529 plan.

2Withdrawals used to pay for Qualified Higher Education Costs are free from federal and Illinois state income tax. Qualified higher education expenses include tuition, fees, books, supplies, and equipment required for enrollment or attendance; certain room and board expenses incurred by students who are enrolled at least half-time; the purchase of computer or peripheral equipment, computer software, or Internet access and related services, if used primarily by the beneficiary during any of the years the beneficiary is enrolled at an eligible educational institution; and certain expenses for special needs services needed by a special needs beneficiary.

How are contributions made?2016-11-09T15:19:35-06:00

The plan is very flexible. You can contribute by:

  • Sending a check.
  • Establishing an automatic investment plan.
  • Rolling over funds from another 529 plan.
  • Invite family and friends to make a contribution to your account through Bright Directions GiftED.
  • Establishing a payroll deduction at work (check with employer for availability).
  • Transferring reward dollars earned with a Bright Directions 529 College Savings Rewards Card.
Can I transfer assets from another 529 plan?2016-03-28T13:57:15-05:00

Yes. You can complete a rollover form to transfer assets from another 529 plan and gain the benefits of the Illinois state income tax deduction. Only the original investment (not the earnings portion) is eligible for the Illinois state income tax deduction.

A same-beneficiary rollover/transfer is allowed once in a 12-month period. Additional transfers are allowed but require a change of beneficiary. Check with your investment professional for further assistance with rollovers.

Is the program audited?2016-03-28T13:58:39-05:00

Yes. Each year an independent public accountant selected by the program manager will audit the program. The treasurer and the Illinois auditor general may also conduct audits of the program and pool.

Where can I obtain a copy of the audited financial statements?2021-01-14T08:30:21-06:00

You can download a copy of the latest audits here:

Does the beneficiary have to attend a school in Illinois?2016-03-28T14:00:41-05:00

No. Many beneficiaries will attend eligible postsecondary institutions in Illinois; however, funds may be used at eligible schools nationwide and at some foreign schools.

Which schools are eligible institutions?2018-10-17T10:23:33-05:00

Any postsecondary educational institution that meets accreditation criteria and is eligible to participate in Federal Student Aid programs is generally eligible. This includes institutions such as public and private colleges and universities; vocational, trade, technical, and professional institutions; and even some foreign schools. Check out a listing of eligible schools at fafsa.ed.gov and use the “School Code Search”.

What are qualified higher education expenses?2020-04-14T10:36:26-05:00

Qualified higher education expenses include tuition, fees, books, supplies, and equipment required for enrollment or attendance; certain room and board expenses incurred by students who are enrolled at least half-time; the purchase of computer or peripheral equipment, computer software, or Internet access and related services, if used primarily by the beneficiary during any of the years the beneficiary is enrolled at an eligible educational institution; and certain expenses for special needs services needed by a special needs beneficiary.

*CAUTION – Illinois Qualified Expenses do not include expenses for:

  1. tuition in connection with the Beneficiary’s enrollment or attendance at an elementary or secondary public, private, or religious school. The amount of cash distributions for such expenses from all 529 qualified tuition programs with respect to a Beneficiary shall, in the aggregate, not exceed $10,000 during the taxable year;
  2. tuition, fees, books, supplies, and equipment required for participation in an Apprenticeship Program;
  3. payments on Qualified Education Loans of the Beneficiary or a sibling of the Beneficiary, subject to a $10,000 aggregate limit.

If a withdrawal is made for such purposes it may be a Federal Qualified Withdrawal and not be included in income for federal and Illinois purposes, but if an Illinois income tax deduction was previously claimed for Contributions to the Account all or part of that deduction may be added back to income for Illinois income tax purposes.

Please consult with your tax advisor.

What if my beneficiary does not go to college or does not use all of the funds?2016-10-18T11:31:02-05:00

If you do not use all the funds in your account – you have a number of options.

  1. You can leave the funds in the account in the event your beneficiary (or another member of the family) goes back to school at a later date.
  2. You can change the beneficiary to another member of the family for their college expenses.
  3. You can withdraw the funds as a nonqualified withdrawal. The earnings portion (not the amount you contributed) is subject to federal and state income taxes and a 10% federal penalty tax. Illinois tax filers: The amount of any deduction previously taken for Illinois income tax purposes is subject to recapture in the event an account owner takes a nonqualified withdrawal from an account or if such assets are rolled over to a non-Illinois 529 plan. Please consult with your tax professional.
What can I do if I receive a refund from an Eligible Educational Institution?2020-04-16T11:10:08-05:00

If you receive a refund from an Eligible Educational Institution for Qualified Higher Education Expenses that were paid from money withdrawn from your Account, you can:

  1. Pay for Other Qualified Higher Education Expenses – you can use the funds to pay other Qualified Higher Education Expenses incurred by that Beneficiary in the same calendar year.
  2. Recontribute Refunded Amounts to a 529 Account – if a student receives a refund of Qualified Higher Education Expenses that were treated as paid by a 529 distribution, the student can recontribute these amounts into any 529 account for which they are the beneficiary within 60 days after the date of the refund.  The amount recontributed cannot exceed the amount of the refund.
    • EXTENSION OF TIME – for refunds made on or after February 1, 2020 and prior to May 16, 2020 the IRS has extended the time to recontribute funds to the greater of 60 days or July 15, 2020.

You should consult with your financial, tax or other advisor regarding your individual situation.

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