529 plan
Hi Terry,
I have followed you for years and appreciate your wisdom. I have a question regarding a 529 plan. I have spent 10k on an MBA this year and plan on spending 12k in 2023. Can I deposit 22k and withdraw 10k during the remainder of 2022 to capture the IL tax credit? Leaving the 22k for 2023 expenses. I paid all expenses out of pocket-no employer assistance.
Thanks,
Terry Says
You only get a tax deduction on your Illinois taxes for $10,000 of your contribution. (Yes, $20,000 if you’re married and filing jointly.)
You don’t have enough time to open the account AND process a withdrawal payment directly to the financial institution. I think you’re getting too cute here — for a relatively small deduction! Not to mention a short time to let the money grow (or diminish).
But I could not find a time limit for the money to be invested before being withdrawn in order to qualify for the deduction. So make your contribution now, get the $10k tax deduction– and carefully distribute the money appropriately next year. (And if you have some leftover, save it for your eventual children!)
