Bright Start Top Year-End Questions
Where is my 2021 Tax Form?
IRS Tax Form 1099-Q is issued only when a withdrawal is requested during the year (please see the next Q&A for information on Year-to-Date contributions for 2021). The 1099-Q tax forms will be mailed at the end of January and will also be posted to your account on the Bright Start web site. To access them on the Bright Start site – here are the steps:
- Log into your account
- Once logged in to your account click on the “Statements & Tax Forms” menu
- On this page you will have the ability to select several “Document Types” including “Account Statement”; “Welcome Letter/Confirm”; “Prior Manager Statements”; or “Tax Forms (1099-Q)”.
- Select “Tax Forms (1099-Q)”
Where can I get the full year 2021 contribution amount for taxes?
2021 Contributions for Illinois state income tax purposes:2021 contribution information is included on your December 31, 2021 account statement (located right below the pie chart on your statement). Contributions are reported on a cash basis so if you made any contributions online at the end of December 2021 or by mail with a late December 2021 postmark you will want to see if they were included in the transaction activity on your December 31 statement or if we received them and posted them in January 2022 as a “Prior Year” contribution. A 2021 postmarked contribution invested in January 2022 as a “Prior Year” contribution should be eligible for the 2021 Illinois tax deduction. Likewise, make sure to review your 1st quarter 2021 account statement for any “Prior Year” contributions for 2020 that you would need to adjust for.
PLEASE REVIEW to your records to match your total contributions. The year-to-date contribution amount we report will also include contributions to your account by others (those generally would be deductible by the contributor versus you). Also, keep in mind ONLY the basis or contribution portion of an out-of-state rollover is deductible (the earnings portion cannot be deducted).
Looking for more tax information? Visit our Tax Center to learn more.
For more information on 529 Savings Plans visit our FAQ page.
What is the limit for the Illinois state income tax deduction?
Individuals who file an Illinois state income tax return are eligible to deduct up to $10,000 per tax year ($20,000 for married taxpayers filing jointly) for total combined contributions to an Illinois 529 plan.
Who can take the Illinois state income tax deduction?
The Illinois state income tax deduction is available to any individual who contributes to an Account and files an Illinois state income tax return.
What is the deadline to contribute to take advantage of the Illinois state income tax deduction?
Contributions may be completed online or mailed. Contributions that are mailed must be postmarked to Bright Start no later than December 31, 2021 to be eligible for a 2021 deduction. Electronic contributions must be completed by 11:59pm Central time on December 31, 2021 to be considered a 2021 contribution.
Any contribution made after 3:00pm Central time on Friday, December 31, 2021 but before 11:59pm Central time on December 31, 2021 will post to your account on January 4, 2022, but will be coded a “Prior Year Contribution” and generally should be eligible for the 2021 state income tax deduction.
Contributions addressed to Bright Start and postmarked in 2021 but received in 2022, will be invested on the day the check is received – will be coded as a “Prior Year Contribution” and should be considered a 2021 contribution for tax deduction purposes.
How do I establish online access?
It’s easy to create new login credentials. Simply use the following steps:
- Select the “Log In” button in the top, right corner at BrightStart.com
- Select “Account Owner”
- Select the “Sign up for online access” button in the middle of the login screen
Will you send me a form showing my contributions so I can take the Illinois state income tax deduction?
In order to take the Illinois state income tax deduction for your contribution, you would simply need to provide your tax preparer with a copy of your canceled check or bank statement, AND Bright Start account number(s). You can also log into your account and review your contributions summary (with your quarterly account statements).
Any Illinois tax payer who makes a contribution to a Bright Start account should be eligible to take advantage of the state income tax deduction. It is our understanding that Illinois Schedule M is where tax deductible contributions to Bright Start are to be reported for Illinois state income tax purposes.
If I make an accelerated gift for Federal Gift Tax purposes this year, will I be able to take the Illinois state income tax deduction in each of the next 4 years for that contribution?
It is our understanding that you may take the Illinois state income tax deduction only in the year that the contribution was made.
The Illinois state income tax deduction does not carry forward to future years for an accelerated gift. You will want to consult your tax or financial professional for more information regarding a large gift and any potential tax considerations and tax filings that may be required.
Do rollovers from an out-of-state 529 plan count for the Illinois state income tax deduction?
The contribution, or basis, portion of a rollover from a non-Illinois 529 plan is eligible for the Illinois state income tax deduction, but not the earnings portion. In order for the rollover contribution to be considered for Illinois state income tax deduction purposes, the rollover check needs to be dated 2021 and the envelope with the rollover check from your previous 529 plan needs to have a 2021 postmark.
Please note, the eligibility for the state tax deduction is based on when we receive the rollover check – not when we receive the completed rollover request form.
Do you have gift cards or gift certificates I could give to my beneficiary to let them know I made a contribution to their account?
We have both gift cards and gift certificates available for you to notify a loved one that a contribution that was made to their 529 account. We would be happy to mail you what you need, or, you can personalize and print either a card or certificate from our “Give a Gift” page.
I need to take a withdrawal from my account.
We recommend matching your qualified expenses and 529 withdrawals in the same calendar year for tax purposes. To request a withdrawal from an account:
- Log into your account online and select the “Withdraw” button to walk through the easy steps.
- Complete and submit the Withdrawal Request Form.
Qualified Higher Education Expenses (Source: IRS Publication 970 January 2021).
These are expenses related to enrollment or attendance at an eligible postsecondary school. As shown in the following list, to be qualified, some of the expenses must be required by the school and some must be incurred by students who are enrolled at least half-time, defined later.
- The following expenses must be required for enrollment or attendance of a designated beneficiary at an eligible postsecondary school.
- Tuition and fees.
- Books, supplies, and equipment.
- Expenses for special needs services needed by a special needs beneficiary must be incurred in connection with enrollment or attendance at an eligible postsecondary school.
- Expenses for room and board must be incurred by students who are enrolled at least half-time (defined below). The expense for room and board qualifies only to the extent that it isn’t more than the greater of the following two amounts.
- The allowance for room and board, as determined by the school, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student.
- The actual amount charged if the student is residing in housing owned or operated by the school. You may need to contact the eligible educational institution for qualified room and board costs.
- The purchase of computer or peripheral equipment, computer software, or Internet access and related services if it’s to be used primarily by the beneficiary during any of the years the beneficiary is enrolled at an eligible postsecondary school. (This doesn’t include expenses for computer software for sports, games, or hobbies unless the software is predominantly educational in nature.)
- The expenses for fees, books, supplies, and equipment required for the designated beneficiary’s participation in an apprenticeship program registered and certified with the Secretary of Labor under section 1 of the National Apprenticeship Act.
- No more than $10,000 paid as principal or interest on qualified student loans of the designated beneficiary or the designated beneficiary’s sibling. A sibling includes a brother, sister, stepbrother, or stepsister. For purposes of the $10,000 limitation, amounts treated as a qualified higher education expense for the loans of a sibling are taken into account for the sibling and not for the designated beneficiary. You can’t deduct as interest on a student loan any amount paid from a distribution of earnings from a qualified tuition program after 2018 to the extent the earnings are treated as a tax free because they were used to pay student loan interest.
Qualified Elementary and Secondary Education Expenses
These are expenses for no more than $10,000 of tuition, incurred by a designated beneficiary, in connection with enrollment or attendance at an eligible elementary or secondary school.
Half-time student. A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic work load for the course of study the student is pursuing, as determined under the standards of the school where the student is enrolled.
*CAUTION – Illinois Qualified Expenses do not include expenses for:
- 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.
- 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.