Using Your 529 College Savings Account

Now that it’s time to put your 529 funds to use, did you know that your college savings can go toward more than just college tuition? A Bright Start college savings account can be used for a wide range of qualified expenses at eligible institutions in Illinois, nationwide, and even some foreign schools.

Consider these things before using your Bright Start funds.

• Your Bright Start account is flexible. Funds can be used at eligible educational institutions across Illinois, the nation, and even some foreign schools.
• The beneficiary named on the account is who you have saved for – and the individual whose qualified college expenses can be paid using the account.
• The account owner is always in control of the account and determines what funds are used for and when and where they are paid.

Using your 529 funds for qualified higher education expenses.

Qualified expenses are related to enrollment or attendance at an eligible postsecondary school. To be qualified, some of the expenses must be required by the school and some must be incurred by students who are enrolled at least half-time. The full list of qualified expenses includes:

Post-Secondary School and Training Expenses

1. Tuition and fees.
2. Books, supplies, and equipment required for enrollment or attendance.
3. Room and board (must be enrolled at least half-time).
   1. On campus, or
   2. Off campus

   K-12 Qualified Elementary and Secondary Education Expenses

   These are expenses for no more than $10,000 of tuition, incurred by a designated beneficiary, in connection with enrollment or attendance at an eligible elementary or secondary school.

   *CAUTION – Illinois qualified expenses do not include expenses for:

   • Tuition in connection with the beneficiary’s enrollment or attendance at an elementary or secondary public, private, or religious school, subject to an annual $10,000 per beneficiary limit.

   If a withdrawal is made for such purposes it may be a federal qualified withdrawal and not be included in income for federal and Illinois purposes, but if an Illinois income tax deduction was previously claimed for contributions to the account, all or part of that deduction may be added back to income for Illinois income tax purposes. Please consult with your tax advisor.

   Plan ahead when it’s time to withdraw funds.

   When it comes time to use your 529 plan for qualified expenses, withdrawing funds is simple. Still, you’ll want to be sure to plan ahead when requesting a withdrawal.

   Here are the simple steps:

   1. Determine how you will pay the expenses.
      • You can personally pay the expenses and be reimbursed from your Bright Start account
      • Once you know what the expenses add up to, you can request a withdrawal from Bright Start in that amount and then pay the expenses
      • You can pay the college directly from your Bright Start account.
      • Or you can request funds be paid from Bright Start to your beneficiary and have them pay the expenses
   2. Go online and request your withdrawal or download and mail in the printable withdrawal form.
   3. Keep your receipts and invoices with your other tax papers.
   4. Review the American Opportunity Tax Credit and the Lifetime Learning Credit and discuss with your tax professional to see if these credits can save you tax dollars. If they can, you will need to coordinate with any Bright Start withdrawals you request.
   5. Plan ahead.
      • When you request a withdrawal from your account we will sell the investments and send funds the following business day. Make sure to allow time for the check to get to you or the college.
      • Please be aware that, due to the opening hours of the trading markets, withdrawals requested later in the day (generally after 3pm CT on a business day) will result in the trade being processed one business day later and the funds will go out a day later.
      • We suggest you request the withdrawal from Bright Start 7-10 days ahead of any due dates.

   Ready to withdraw funds?

   • Generally, if a request is received in good order on a business day prior to the close of the markets (typically 3pm CT on a business day), the investments will be sold at that day’s closing prices, the funds will be received by the plan the following business day, and a check mailed.
   • Please plan ahead and allow adequate time for the college to receive and process the payment. We suggest requesting your withdrawal 10 days prior to the due date.
   • For withdrawals payable to the account owner’s bank account, please allow several business days for your bank to process the payment and credit your account.
   • Bright Start can also make payment directly to a college or university. Please note that some institutions may take three to seven business days to post payments to a student account. Please allow sufficient time for mail time and processing by the school.

   Withdraw funds in two easy ways with Bright Start.

   Online

   Log in to your online account and request a withdrawal.

   Mail

   Print and mail in a completed Withdrawal Request Form.

   Recontribution of Refunded Amounts

   If a student receives a refund of qualified education expenses that were treated as paid by a 529 distribution, the student can recontribute these amounts into any 529 for which they are the beneficiary within 60 days after the date of the refund to avoid the need to figure the taxable part of the 529 distribution. This can occur, for example, when a student drops a class or withdraws mid-semester.

   Resources

   Illinois Department of Revenue

   IRS

   IRS: Education Credits -

   American Opportunity Tax Credit and Lifetime Learning Credit

   IRS Publication 970

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     The Bright Start Direct-Sold College Savings Program is sponsored by the State of Illinois and administered by the Illinois State Treasurer, as Trustee. Union Bank and Trust Company serves as Program Manager. Balances in your Bright Start account are not guaranteed or insured by Bright Start, the State of Illinois, the Illinois State Treasurer, any other state or federal agency, Union Bank and Trust Company or any of its affiliates, the Federal Deposit Insurance Corporation (except as provided in the Program Disclosure Statement solely with respect to the FDIC-insured Bank Savings Underlying Investment), or any other entity.

     An investor should consider the investment objectives, risks, and charges and expenses before investing. This and other important information is contained in the Bright Start Direct-Sold College Savings Program Disclosure Statement, which can be obtained at BrightStart.com and should be read carefully before investing. You can lose money by investing in a portfolio. Each of the portfolios involves investment risks, which are described in the Program Disclosure Statement.

     Before you invest, consider whether your or the beneficiary’s home state offers any state tax or other benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in that state’s 529 plan.

     NOT FDIC INSURED* NO BANK GUARANTEE MAY LOSE VALUE

     *Except the Bank Savings Underlying Investment