529 Rollover on Illinois

Forum|Forum|6 years ago
April 16, 2020
7 replies
159 views

We rolled over money from a 529 to Illinois' Bright Start College Savings Program.

On the Illinois return do we have to enter an amount in the "Distributions from a 529 college savings, tuition or ABLE programs" section? The money was not distributed to us, just rolled over.

MaryK4

Level 15

No, if it was a rollover, it does not have to be reported to Illinois.

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gpaulltax

Level 2

Can an answer be be generated if the rollover goes from IL to another state 529 plan?

ReneeM7122

Level 9

Yes, there may be federal income tax consequences to an outbound 529 rollover from Illinois to another state, even though 529 rollovers are generally not taxable. This is because some states treat outbound rollovers as taxable events. Unfortunately, Illinois is one of those states. You may have to pay state income tax on the earnings portion of the rollover, and the state may impose a recapture of any state income tax breaks applicable to the distribution.

The states that penalize outbound rollovers include Alabama, Arkansas, Colorado, Georgia, Idaho, Illinois, Indiana, Iowa, Montana, Nebraska, New Mexico, New York, Ohio, Oklahoma, Rhode Island, Utah, Virginia, Washington DC and Wisconsin.

@gpaulltax