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).
Your financial advisor can guide you through the steps to get enrolled.
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.
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.
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 And when withdrawn for qualified college expenses, they are not subject to federal or Illinois state income tax.2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.
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.
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.
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.
No. Many beneficiaries will attend eligible postsecondary institutions in Illinois; however, funds may be used at eligible schools nationwide and at some foreign schools.
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”.
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.
If you do not use all the funds in your account – you have a number of options.
- 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.
- You can change the beneficiary to another member of the family for their college expenses.
- 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.