What are the tax consequences of a cancellation, refund or transfer?
Transferring a contract to another purchaser or beneficiary should create no tax consequences. If interest is included with a cancellation or refund paid to a purchaser, income taxes may be due on the earnings portion of the refund as well as a 10% federal withdrawal penalty if the money is not being used for a qualified higher education expense. If the refund is due to death, disability or receipt of a scholarship, tax penalties will not apply but income tax may be due on the plan earnings if the refund is not used for a qualified higher education expense. *Please see the Master Agreement and Disclosure Statement for details regarding tax advantages and implications. The College Illinois! Prepaid Tuition Program cannot provide purchasers with any legal or tax advice. Purchaser should consult their own tax advisor concerning federal and state tax implications of purchasing a contract.
