The Illinois state treasurer is pushing the Bright Start program, and urging account holders to make contributions before the end of the year. This is the college saving program, and state Treasurer Dan Rutherford says contributions must be made in 2012 to occasion the income tax benefits during the 2012 tax year.
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“The reason that we’re highlighting this at this moment is because the clock does tick with regards to Tax Year 2012. If one has an account, it’s a reminder to them to please, if they want to for tax purposes, plan to participate in the next few days left in December,” he said.
The federal tax benefit is that the interest in the account is tax-free, as long as it’s used for educational purposes. At the state level, the contributions are tax-deductible up to $10,000 per person, or $20,000 per married couple. Those tax benefits do not disappear at the end of 2012, but the opportunity to take advantage of them for 2012 does. Contributions made in 2013 will affect Tax Year 2013.
Since the state income tax rate is now 5 percent, Rutherford is calling this a “bonus” of $500 for a $10,000 contribution. Bright Start accounts are often set up by parents or grandparents to be available to pay college costs once children reach college age.