529 Plan and College Savings

Archive for September, 2006

Question: If I live in Illinois, can I participate in the Fidelity (New Hampshire) 529 Plan for my children?

What would be the drawbacks of doing this? Are there tax implications?

Answer: You are free to participate in any state’s 529 Plan. However, if you contribute to a plan other than the ones offered in IL, you will miss out on some state income tax savings.

Contributions to either an Illinois 529 savings plan or the Illinois prepaid tuition program of up to $10,000 per year for an individual taxpayer, and $20,000 per year for married taxpayers filing jointly, are deductible in computing Illinois taxable income.

You’ll have to decide if the benefits of the NH plan outweigh the tax savings of the IL plan.

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