Tax Law Changes for 529 College Savings Plans

December 2017

The tax reform bill signed into law on December 22, 2017 includes several provisions related to 529 plans. The provisions are:

1. Expanded Qualified Higher Education Expenses

Effective for distributions made after December 31, 2017, the definition of Qualified Higher Education Expenses under the Internal Revenue Code of 1986, as amended (the “Code”) is expanded to include:

  • expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.

The amount of cash distributions from all qualified tuition programs with respect to a beneficiary during any taxable year shall, in the aggregate, include not more than $10,000 in expenses for tuition incurred during the taxable year in connection with the enrollment or attendance of the beneficiary as an elementary or secondary public, private, or religious school student.

At this time, it has not yet been determined whether and how the Illinois statute that establishes the Plan may be modified to include this expanded definition. You should consult your tax advisor regarding your individual situation.

2. Rollovers to ABLE Programs from Bright Start

Effective for periods prior to January 1, 2026, you may direct a transfer of money from your Account to an ABLE account (as defined in section 529A(e)(6)) of the Beneficiary or a member of the family of the Beneficiary, subject to the contribution limits for ABLE accounts. Alternatively, you may make a withdrawal from your Account and re-deposit the withdrawn balance within 60 days into an ABLE account subject to the limitations described in the immediately preceding sentence. Such amounts would count towards the overall limitations on contributions to an ABLE account within a tax year. You should consult your tax advisor regarding your individual situation, including whether a rollover to an ABLE account would result in the recapture of any Illinois State income tax deduction previously claimed.

As details become available we will share additional information.