Families who send their children to private schools probably thought they received a break under the new federal tax law. But Illinois State Treasurer Michael Frerichs warns that's not necessarily so.
Bright Start and Bright Directions are savings plans designed to let Illinois parents accrue tax-free interest while stashing money to pay their kids’ college tuition. The new tax law says these plans, known as 529 accounts, can now be used to pay for up to $10,000 per year in private school tuition for younger kids, too.
Frerichs says that’s okay — as long as you don't try to write that money off on your state income tax. Treasurers in other states have the same issue, he says.
"Congress passed this legislation without public hearing, without advertising some of the changes they wanted to make. Some of these problems could've been avoided if they had just reached out and listened to us, or if they deferred implementation,” Frerichs says. "I think that members of Congress were in such a rush to reward their campaign contributors that they didn't consult with their constituents, and with the states who administer these programs.”
Separately, Illinois implemented a tax credit program for individuals and corporations that want to donate up to a million dollars for k-12 private school tuition scholarships. Like the federal plan, it was also enacted without a public hearing, and has faced several technical glitches.