If enacted, this bill could impact how individuals in Illinois plan for both their educational and retirement savings. It acknowledges the trend of moving funds from educational savings accounts to retirement vehicles and aims to alleviate some of the tax burdens associated with such conversions. As a result, taxpayers could retain more capital for their personal savings, potentially improving their financial security in retirement.
Summary
House Bill 5366 proposes a modification to the Illinois Income Tax Act by adding a deduction for amounts that a taxpayer's federal adjusted gross income includes, which are linked to the conversion of funds from a Section 529 qualified tuition program to a Roth IRA. This legislative change is intended to facilitate the management of funds for educational savings, allowing individuals greater flexibility in how they allocate their education savings fund conversions into retirement accounts. The effective date of this proposed change is immediate upon enactment.
Contention
Some points of contention surrounding HB5366 may arise from debates about the broader fiscal implications of extending such deductions. Critics could argue that these tax deductions might reduce state revenue that could otherwise be deployed for educational funding at large. Moreover, there may be concerns regarding equity, wherein wealthier individuals with more substantial 529 account contributions could disproportionately benefit from such a tax reduction, possibly widening the financial disparity among residents.