Frequently Asked Questions

When you contribute to a Bright Start 529 Plan account, any earnings are federal and Illinois income tax-deferred until withdrawn. Then withdrawals used to pay for qualified education expenses are federal and state income tax-free.

Yes, Illinois taxpayers can reduce their state taxable income up to $20,000 if married filing jointly ($10,000 filing single) for contributions made into Bright Start 529.¹

Footnotes

1. ¹An individual who files an individual Illinois state income tax return will be able to deduct up to $10,000 per tax year (up to $20,000 for married taxpayers filing a joint Illinois state income tax return) for their total, combined contributions to the Bright Start Direct-Sold College Savings Program, the Bright Directions Advisor-Guided 529 College Savings Program and College Illinois! 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 added back to Illinois taxable income in the event an account owner makes a nonqualified withdrawal from an account. If Illinois tax rates have increased since the original contribution, the additional tax liability may exceed the tax savings from the deduction.↩

No. If you are making a withdrawal to cover a qualified education expense for the beneficiary, you are not subject to federal or state income tax.

Qualified education expenses such as tuition, certain housing and food expenses, fees, books, supplies, computers and equipment required for the enrollment and attendance of the beneficiary at an eligible educational institution, which includes most postsecondary institutions. Review the Plan Description for additional details on eligible expenses and withdrawals.

The earnings portion of a nonqualified withdrawal is subject to federal and state income taxation and an additional 10% federal tax. See the Plan Description for details.

The available federal tax benefits for paying qualified education expenses through these programs must be coordinated to avoid the duplication of such benefits. Account owners should consult a qualified tax advisor regarding the interaction under the Internal Revenue Code (IRC) of the federal income tax education-incentive provisions when addressing account withdrawals.

Contributions to a Bright Start 529 account may help reduce the taxable value of your estate. Learn more about gifting to an existing account. For additional details on tax benefits, we recommend consulting a tax advisor.

There is no federal income tax deduction for 529 plan contributions, regardless of where you live or which 529 plan you participate in.

Plan contributions are always made after tax.

Effective January 1, 2024, for federal tax purposes and August 2, 2024, for Illinois tax purposes, rollovers are permitted from an account to a Roth IRA without incurring federal or Illinois income tax or penalties, subject to the following conditions:

• The account must be open for 15 or more years, ending with the date of the Roth IRA rollover;
• Contributions and associated earnings that you transfer to the Roth IRA must be in the account for more than five years, ending with the date of the Roth IRA rollover;
• The Internal Revenue Code permits a lifetime maximum amount of $35,000 per beneficiary for Roth IRA rollovers;
• Account assets can be rolled over only into a Roth IRA maintained for the benefit of the beneficiary of the account;
• Account assets must be sent directly to the Roth IRA;
• Roth IRA income limitations are waived for Roth IRA rollovers; and
• The Roth IRA contribution is subject to the Roth IRA contribution limit for the taxable year applicable to the designated beneficiary for all individual retirement plans maintained for the benefit of the designated beneficiary.

The IRS may issue additional guidance that may impact Roth IRA rollovers, including the above referenced conditions.

State tax treatment of Roth IRA rollover is determined by the state where you file state income tax. Account owners and beneficiaries should consult with a qualified tax advisor before rolling over funds from their account to contribute to a Roth IRA. You are responsible for determining the eligibility of your account for a Roth IRA rollover, including tracking and documenting the length of time the account has been opened and the amount of assets in account eligible to be rolled into a Roth IRA.

The deadline for contributions is December 31.

Qualified higher education expenses means, generally, the cost of tuition, fees, books, supplies and equipment required for the enrollment or attendance of a beneficiary at an eligible educational institution, certain costs of housing and food (room and board), the cost of computer or peripheral equipment, certain software, and 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, as well as certain additional enrollment and attendance costs of beneficiaries with special needs. For both federal and Illinois tax purposes, any reference to a qualified higher education expense also includes a reference to (a) expenses for fees, books, supplies and equipment required for the participation of a beneficiary in an apprenticeship program and (b) amounts paid as principal or interest on any qualified education loan of either the beneficiary or a sibling of the beneficiary up to a lifetime limit of $10,000 per individual. Distributions treated as qualified higher education expenses with respect to the loans of a sibling of a beneficiary will count toward the limit of the sibling, not the beneficiary. Such loan repayments may impact student loan interest deductibility.

For federal but not Illinois tax purposes, any reference to a qualified higher education expense also includes a reference to tuition in connection with enrollment or attendance at a primary (i.e., elementary school) or secondary (i.e., middle school or high school) (together, referred to as “K-12”) public, private or religious school up to a maximum of $10,000 of distributions for such tuition expenses per taxable year per beneficiary from all 529 Plans.

State tax treatment of withdrawals is determined by the state where you file state income tax. Withdrawals for K-12 tuition expenses are not qualified withdrawals for Illinois tax purposes. Please consult with a tax advisor before withdrawing funds for any such expenses, rollovers or loan repayments.

A nonqualified withdrawal is any withdrawal that does not meet the requirements of being a (a) qualified withdrawal, (b) taxable withdrawal or (c) rollover. The earnings portion of a nonqualified withdrawal is subject to state and federal income taxation and the 10% additional federal penalty tax on earnings (the “Additional Tax”). See the Plan Description for more info.

Your Bright Start 529 account can be used at eligible colleges, universities, vocational schools, community colleges, graduate or postgraduate programs, apprenticeships and more.¹ Contact your school to determine whether it qualifies as an eligible educational institution or use the Federal School Code Search tool on the Free Application for Federal Student Aid (FAFSA) website.

Footnotes

1. ¹Withdrawals for registered apprenticeship programs can be withdrawn free from federal and Illinois taxes. You should talk to a qualified professional about how tax provisions affect your circumstances. Apprenticeship programs must be registered and certified with the Secretary of Labor under the National Apprenticeship Act.↩

You may request a withdrawal via your account online. Select the beneficiary you would like to withdraw the money for, click “Make a Withdrawal” on the lefthand navigation and follow the directions. You may also request a withdrawal using the Withdrawal Request Form.

The beneficiary must be enrolled at least half-time at an eligible postsecondary institution. For students living in housing owned and operated by the institution, the full invoice amount will be used to determine the qualified housing and food expenses. In the case of students living at home or in off-campus housing, the “cost of attendance” allowance for the individual institution will be used for the qualified housing and food expenses.

Computers and related technology such as internet access fees, software or printers are also qualified education expenses. The student must be the primary user of the equipment.

Federal tax treatment of a 529 plan’s qualified higher education expenses (QHEEs) includes the repayment of up to $10,000 (including principal and interest) on any qualified education loan of either a 529 plan designated beneficiary or a sibling of the designated beneficiary. To be a qualified expense, the loan repayment amount for an individual is subject to a lifetime limit of $10,000.¹ Get additional details in the Plan Description.

Footnotes

1. ¹Withdrawals for student loans can be withdrawn free from federal and Illinois taxes. You should talk to a qualified professional about how tax provisions affect your circumstances.↩

Examples of a taxable withdrawal include a beneficiary’s death, permanent disability, receipt of a scholarship award or attendance at a military academy. For more information, review the Plan Description.

A taxable withdrawal will be subject to applicable state and federal income tax on earnings, if any, but will not be subject to the 10% additional federal tax on earnings (the “Additional Tax”).

Taxable withdrawals that are not subject to the 10% federal penalty tax are withdrawals due to the beneficiary’s death, the permanent disability of the beneficiary, the beneficiary’s receipt of a scholarship award or certain other tax-free amounts, or the beneficiary’s attendance at a military academy. A taxable withdrawal will be subject to applicable state and federal income tax on earnings, if any.

Yes. Funds may be redeposited to your account within 60 days of the refund without penalty should a student need to withdraw from a class. The recontributed amount cannot exceed the amount of the refund.

Anyone with a valid Social Security Number or Taxpayer Identification Number can be the beneficiary, including the account owner. Learn more about who can open, benefit from and contribute to a Bright Start 529 account.

Beneficiaries can include your son or daughter, your grandchild, niece/nephew, cousin, family friend, etc.

There’s no cost associated with opening a Bright Start 529 account or owning more than one account. You could open a different account for each child. And each individual child could have multiple accounts owned by different account owners (e.g., Grandma opened an account for Billy, and Dad opened an account for Billy, so there can be two accounts with Billy as the beneficiary.)

You might do this to align investment strategies with the time frame each child will begin using the funds. For example, an older child’s account could be more conservatively invested to help protect your contributions as they near college, whereas a younger child’s account might be invested to balance growth and income strategies during a longer time frame.

Multiple accounts can also aid in estate planning by ensuring that college funds are allocated appropriately to each beneficiary upon the death of the account owner. But if you’d like to stick to one account, you can change beneficiaries at any time and at no additional cost.

Yes. A beneficiary may have more than one Bright Start 529 account. However, an account owner can have only one account for each beneficiary.

For example, a beneficiary may have an account owned by their parent and/or grandparent and/or aunt, etc. There is an overall maximum account balance limit for accounts for a beneficiary in the plan and any additional accounts in other Illinois Section 529 programs of $500,000.

Yes. You can change the beneficiary of your account at any time or transfer a portion of your investment to a different eligible beneficiary. The new beneficiary must be an eligible member of the previous beneficiary’s family.

For more information, read the form on how to change your beneficiary.

Here’s where you find performance data for Bright Start 529 Investment Portfolios.

Bright Start 529 offers a variety of investment portfolios to fit your life situation, risk tolerance and savings goals. These vary in investment strategy and degree of risk, allowing you to select a portfolio or combination of portfolios that fit your needs and savings goals.

To compare our Bright Start 529 Investment Portfolios, visit our investment comparison page. For more information on the investment objectives, risks, charges and expenses, read the Plan Description.

Yes. Each time you make a contribution, you may select from any of the Bright Start 529 Investment Portfolios. Once invested in a particular portfolio, contributions and earnings may be transferred to another investment portfolio twice per calendar year or upon transfer of funds to a plan account for a different eligible beneficiary (see the Plan Description for more information).

To transfer funds between investments, log in to your account, click “View Details” for your beneficiary, click “Change Investment Options,” then click “Continue” in the Exchange Now section. You may also request and submit by mail the Change of Investment Form.

A Bright Start 529 account can be started with any amount. How much you need to save will depend on what you plan to use the money for and when.

A few helpful tools:

• Check out the College Savings Calculator to estimate the cost of college.
• Use our College Planning Calculator to see how your savings could add up over time.

You can contribute to a Bright Start 529 account by any of the following: check, electronic funds transfer, establishing a recurring contribution, establishing payroll direct deposit, rollover from another state’s 529 plan account or redemption proceeds from a Coverdell Education Savings Account or qualified U.S. savings bond. Your contribution will be invested according to your allocation instructions, which you may change at any time online, by telephone or by requesting and submitting the Change of Investment Form. For more information, click here.

Contributing to an existing Bright Start 529 account is easy and secure with our online Ugift^® platform. Gift contributions can also be made by check and mailed in. Illinois taxpayers’ gifts may be eligible for the state tax deduction. Check with your tax professional.

For the tax year 2024:

• There’s no federal gift tax on contributions you make up to $18,000 per year if you’re a single filer or $36,000 if you’re a married couple.
• You can also accelerate your gifting with a lump-sum gift of $90,000 if you’re a single filer or $180,000 if you’re married and prorate the gift over five years per the federal gift tax exclusion.
• You can gift this amount to as many individuals or beneficiaries as you like, free from income tax.

Consult your tax professional for more details. Learn more about gifting here.

To view your transaction history, log in to your account, click “View Details” for your beneficiary and scroll down to the transactions section. You can always speak to one of our college savings specialists at 877-432-7444, Monday through Friday, 7 a.m. to 7 p.m. CT.

There is no maximum Bright Start 529 contribution limit. However, there is an overall maximum account balance limit of $500,000, which applies to all accounts opened for a beneficiary in the plan and any additional accounts in other Illinois Section 529 programs. Accounts that have reached the maximum account balance limit may continue to accrue earnings.

Bright Start 529 accounts can be opened with any amount, and contributions of any amount can be made. Check out our unique gifting feature to see how you can easily and securely ask for and manage gift contributions to your Bright Start 529 account.

Assets in a parent-owned 529 account have less of an impact on financial aid than some other savings methods. The Student Aid Index (SAI), formally known as Expected Family Contribution (EFC), calculations for financial aid generally factor parent assets outside of retirement savings at approximately 5%, whereas student assets are generally factored in at 20% or more. Therefore, a parent-owned 529 account may have less of an impact on financial aid eligibility than assets owned by the student.¹

Footnotes

1. ¹The treatment of investments in a 529 savings plan varies by school. Assets are typically treated as the account holder’s and not the student’s. (Student assets are generally assessed at 20%, whereas parental assets are generally assessed at 5.6%.) Any investments, including those in 529 accounts, may affect the student’s eligibility to get financial aid based on need. You should check with the schools you are considering regarding this issue.↩

If the beneficiary receives a scholarship that covers the cost of qualified expenses, you can withdraw the funds from your account up to the amount of the scholarship without incurring the 10% federal tax penalty on the earnings portion. However, the earnings portion will be subject to federal and state income tax. If the amount withdrawn exceeds the amount of the scholarship, the earnings portion of the amount withdrawn will be subject to the additional 10% federal penalty tax. Please consult with a qualified tax advisor or consultant.

Historically, withdrawals from grandparent-owned 529 plans have been considered untaxed income to the student and added to the student’s adjusted gross income on the FASFA. Beginning with the 2024–2025 FASFA, withdrawals for grandparent-owned 529 plans will no longer need to be reported on the FASFA or negatively affect the student’s eligibility for federal financial aid. FASFA simplification is subject to change. You should check with the schools you are considering regarding this issue. For assistance or help completing FASFA, click here.

Anyone with a valid Social Security Number or Taxpayer Identification Number who is at least 18 years of age can open a Bright Start 529 account. Accounts can be opened online.

There are no sales charges, startup fees or maintenance fees associated with Bright Start 529 accounts. For details on total annual asset-based fees, comprised of the underlying investment expenses for each investment portfolio and the plan manager fee, review the Plan Fee Table in the Plan Description.

Yes. Whether you have recently moved to the state, have an underperforming or higher-cost 529 plan or just want to simplify, consolidating 529 accounts into Bright Start 529 is easy. You can transfer funds from another 529 plan to your Bright Start 529 account for the same beneficiary once within a 12-month period without incurring tax penalties.

Consolidating education savings into Bright Start 529 also gives you a single view of your savings and performance as well as single-step payments to colleges, universities, etc.

You may also save money that can go right back into your college fund. Bright Start 529 expenses are among the lowest in the country and less than half the national average for 529 plans.¹ You pay no sales charges, startup fees or maintenance fees.

The 529 plan from which you are transferring funds may be subject to different features, costs and surrender charges. As such, you should consult your tax advisor or the other 529 college savings plan prior to making any decisions. For more information, see how to manage an incoming rollover from another 529 saving plan account.

Footnotes

1. ¹Source: ISS Market Intelligence 529 College Savings Fee Analysis Q2 2024. Bright Start Direct-Sold College Savings Program’s average annual asset-based fees are 0.24% for all portfolios compared to 0.51% for all 529 plans.↩

Log in to sign up for electronic delivery for statements, transactions, profile confirmations and tax forms.

For information, please click here.

If you would like to establish an UTMA/UGMA account, please contact our call center to obtain an application at 1-877-432-7444.

Illinois First Steps is a program designed to jump-start college savings for new parents or legal guardians of an eligible child. The key features include the following:

• The State of Illinois will provide a seed deposit of $50 for an eligible child, born or adopted on or after January 1, 2023, to a parent or legal guardian who is a resident of Illinois at the time of birth or adoption.
• Only one Illinois First Steps one-time $50 seed deposit may be claimed per eligible child.
• The parent or legal guardian of the eligible child must claim the funds for the beneficiary before the beneficiary’s 10th birthday.

It’s easy—the parent or guardian of the eligible child would follow these simple steps:

1. Open a Bright Start 529 account.
2. Name the eligible child as beneficiary of the account.
3. Complete the simple claim form included in the new account set up process.
4. That’s it! Illinois First Steps will then review and verify the information submitted to validate the claim.

Bright Start 529 account owners who meet the Illinois First Steps eligibility requirements can claim the one-time $50 seed deposit for their new child by logging in to your account.

The State of Illinois will provide a one-time seed deposit of $50 for every eligible child, born or adopted on or after January 1, 2023. The seed deposits can be claimed for all eligible children of parents residing in Illinois at the time of the child’s birth or adoption. Children born to Illinois resident parents who give birth to a child outside Illinois (such as a family residing in Metro East who elects to give birth at a hospital in Saint Louis, Missouri) will be eligible for the program. Only one Illinois First Steps $50 seed deposit may be claimed per eligible child.

Once a parent submits a claim for the seed deposit, the information will be verified against birth records and information from the Illinois Department of Public Health and Illinois Department of Revenue records. If the claim is verified, the seed deposit will be made the following quarter. The funds will be held in an omnibus account owned and administered by the Illinois State Treasurer.

Absolutely. Illinois First Steps is designed as a pledge to help you get started. After the one-time $50 seed deposit, the rest of your college savings contributions to your Bright Start 529 account are up to you. You can make contributions at any time or set up an automatic investing plan for recurring deposits or even invite family and friends to make contributions to your Bright Start 529 account.

The beneficiary will be able to spend their seed funds—including any potential net earnings and interest—on qualified higher education expenses as identified by Illinois (does not include K-12 expenses) once they complete high school or turn 18 years of age. To use the funds, they must be a resident of Illinois but may use the funds at eligible colleges, trade schools, and apprenticeship programs anywhere in the United States and at some institutions abroad.¹

Footnotes

1. ¹If the funds aren't used for qualified higher education expenses, a federal 10% penalty tax on earnings (as well as federal and state income taxes) may apply.↩

Bright Directions account owners who meet the Illinois First Steps eligibility requirements can claim the one-time $50 seed deposit for their new child. Contact your advisor to establish an account and make your claim.

You can open a Bright Start 529 account and start saving. Any adult age 18+ with a U.S. address and a Social Security Number or Individual Taxpayer Identification Number can open a Bright Start 529 College Savings account.