- Held a job from January 2020 – June 2020 in Illinois. I have been paying Illinois state taxes and will be filing Illinois income tax for 2020 for this period.
- In June 2020, I've moved out of Illinois to Alaska which has no income tax.
- In July 2020, I've opened up and contributed to a 529 account which is based in Delaware through my employer retirement/brokerage company.
While I am a part-time resident of Illinois in 2020, I was wondering if I can still take advantage of the state's tax deduction by doing the following:
- Open up a 529 account based in Illinois
- Rollover the funds from Delaware 529 to Illinois 529 account. Illinois counts this as a tax-deductible contribution.
- Close Delaware 529 account and contribute into Illinois 529 account.
- In 2020 Illinois income tax, claim these contributions as deductions.
It seems from the references below, this method seems sound. However, I was wondering if I could get into trouble of claiming an Illinois tax deduction from contributions when I was out-of-state (Alaska). I could probably argue the income I made in Illinois was used to contribute into the Illinois 529.
A 529 Plan would be considered a "qualified tuition program".
The Illinois Administrative Code provides that in the case of a rollover from a non-Illinois qualified tuition program, the amount of the rollover that is treated as a return of the original contribution to the prior qualified tuition program (but not the earnings portion of the rollover) is eligible for the deduction for Illinois individual income tax purposes.
An individual who files an individual Illinois state income tax return will be able to deduct up to $10,000 per tax year (up to $20,000 for married taxpayers filing a joint Illinois state income tax return) for their total, combined contributions to the Bright Start College Savings Program, the Bright Directions Advisor-Guided 529 College Savings Program, and CollegeIllinois! during that tax year.