A state representative says his idea of mirroring Illinois law to the recent federal tax reform to allow for tax free investments for K-12 education will help keep investments in Illinois’ accounts and not diverted to other states.
State Rep. Peter Breen, R-Lombard, said his proposal would be a simple change to state law, but it would be a big benefit for Illinois families.
“This is really a parent protection measure, a taxpayer protection measure,” Breen said.
Expanding the use of these tax-free funds will be help hard-working Illinois families save for their kids’ education, he said.
Americans for Prosperity Illinois State Director Andrew Nelms said the proposal is a wonderful idea that gives parents more control over educational opportunities.
“To give them an alternative, to give that family hope, to give that child hope, I think is an incredible thing,” Nelms said.
Illinois has 529 savings plans set up to allow parents to set aside pre-tax dollars to use on their kids' higher education expenses.
For example, parents starting a family are able to set a portion of their salaries each aside in pretax 529 accounts to help pay later for their college education. No federal or state taxes are taken out of the money that goes into the 529 account.
Federal tax reform now allows the parents to use those pretax dollars to help pay for private elementary, middle and high schools, in addition to college.
But Treasurer Michael Frerichs warned Illinois taxpayers last month that if they tried to use their 529 savings plans for K-12, like federal law now allows, they could face state tax penalties.
Breen said he has legislation that will allow K-12 expenses to be drawn from Illinois 529 plans.
“I don’t want to see Illinois parents taking their money out of their own Illinois 529 plans in our state and moving them out of state just so they can use them for their K-12 education,” Breen said.
Frerichs’ office says he’s reviewing the proposal but has yet to take a position.