Illinois Tax: Bright Start 529 Rollover to Vanguard 529

Forum|Forum|1 year ago
April 1, 2025
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I opened a 529 account for my child with Bright start in 2021 and over last 4 years I have contributed around 35K to this account. As I live in Illinois, I got tax credits for this investment in prior years

Last year, I was told by my employer that Bright start is not one of the "approved" 529 funds that I can invest in. I work for a public accounting company that doesn't allow investment in any Illinois approved 529 programs.

Consequently, I was forced to rollover my 529 to Vanguard's 529 program which doesn't provide me any state tax benefits in Illinois. I received a 1099-Q from Bright start for 2024 but I have 3 questions:

Will I have to pay taxes on the total amount that was rolled over to Vanguard's 529?
Will Illinois clawback the tax benefits I received in previous years?
How do I do I report this while filing state taxes?

Other

MAK70

You do not have to pay tax on the rollover or adjust for the credit you claimed in prior years. Since the rollover is not taxable income on the federal return, you do not have to make any adjustments on the Illinois return.

See Schedule M Instructions Line 4.