Illinois 529 State Tax Deduction: Up to $10,000 Off Your Taxes

Unlock the Power of Saving for College

As a parent or guardian, you want to provide the best possible future for your children. That includes giving them the opportunity to pursue higher education. But the cost of college tuition has been skyrocketing in recent years, making it increasingly difficult for families to afford.

Enter the Illinois 529 plan, a state-sponsored college savings plan that offers a valuable tax deduction. With this plan, you can save for your child's education while reducing your state income tax liability by up to $10,000 per year.

How the Illinois 529 State Tax Deduction Works

The Illinois 529 plan allows you to contribute up to $5,000 per year for each beneficiary. These contributions are made after-tax, meaning you don't get a deduction in the year you contribute.

However, when you withdraw the money from the plan to pay for qualified education expenses, you won't have to pay state income tax on the earnings. This can result in significant savings over time.

Example:

Let's say you contribute $5,000 per year to an Illinois 529 plan for 18 years. At the end of that period, you will have contributed a total of $90,000. Assuming an average return of 5%, your account will have grown to approximately $147,646.

When you withdraw the money to pay for your child's college tuition, you won't have to pay state income tax on the $57,646 in earnings. If you are in the 5% state income tax bracket, this would save you $2,882 in taxes.

Eligibility for the Illinois 529 State Tax Deduction

To be eligible for the Illinois 529 state tax deduction, you must meet the following criteria:

• Be a resident of Illinois
• Have a child or other eligible beneficiary who is a U.S. citizen or resident
• Contribute to an Illinois 529 plan

Benefits of the Illinois 529 State Tax Deduction

There are several benefits to taking advantage of the Illinois 529 state tax deduction, including:

• Reduce your state income tax liability by up to $10,000 per year
• Save for your child's education in a tax-advantaged way
• Help your child avoid student loan debt
• Provide a head start for your child's future

How to Apply for the Illinois 529 State Tax Deduction

To claim the Illinois 529 state tax deduction, you will need to fill out Schedule IL-R and attach it to your state income tax return.

On Schedule IL-R, you will need to provide the following information:

• Your name and Social Security number
• The name and Social Security number of the plan beneficiary
• The amount of your contribution to the plan

Conclusion

The Illinois 529 plan is a valuable tool for families saving for college. With the state tax deduction, you can reduce your state income tax liability by up to $10,000 per year while also saving for your child's future.

If you are a resident of Illinois, I encourage you to explore the benefits of the Illinois 529 plan. It is a smart way to save for your child's education and reduce your state income taxes.

Additional Resources

• Illinois 529 Plan
• Illinois Board of Higher Education
• IRS 529 Plans

Tables

Table 1: Contribution Limits for the Illinois 529 Plan

Table 2: State Tax Deduction for the Illinois 529 Plan

Table 3: Investment Options for the Illinois 529 Plan

Table 4: Fees for the Illinois 529 Plan