An Overview of the Arizona College Savings (529 plan) Program

529 plan ArizonaThe Arizona Family College Savings Program (529 Plan) forms the Section 529-College Savings Plan. It falls under the sponsorship of the State of Arizona utilizing the Arizona Commission for Post Secondary Education. The 529 Plan has been formulated to support families trying to meet the increasing expenditure involved in attaining higher education. The program offers a simple, flexible as well as tax-beneficial way of saving for college.

 

Details of the tax incentive

 

The tax benefit offers an income tax deduction in Arizona for the contributions towards any 529 plan of the state. The incentive is an addition to the existing 529 plan tax benefits, which offer tax-deferred growth of assets and tax-free withdrawals when funds get utilized for eligible higher education expenditure.

  • In case of joint tax filing, married couples have the option to withdraw up to $4,000
  • Household heads or single individuals can withdraw up to $2,000

Families need to study the 529 plan of their state prior to investing in some other state’s plan. Taxpayers might discover that they get closer to their college saving objective by taking in-state benefits into account.

It is vital for families to have a consultation with a tax adviser if looking to make a decision regarding college savings. They can get in touch with the Arizona Department of Revenue Taxpayer Information and Assistance Section at (602) 255-3381 to get their queries answered.

SB 1179, Sec 30. 43-1022

 

The amount is contributed to the college-savings scheme during the taxable year recognized pursuant to the 529 section (Internal Revenue System) to an extent that it does not deduct contributions while calculating federal adjusted total income. The subtracted amount should not exceed:

(a) $2,000 for a household head or a single individual

(b) $4,000 for a married couple filing a return jointly. If the wife and husband decide to file their own returns separately, either of the taxpayer can pay the deduction or it could be divided between the two. However, the combined subtractions for the couple should not be more than four thousand dollars.

Plan Benefits

 

  • Tax-exempted withdrawals
  • Minimal investment
  • Professional fund management
  • Option to use funds at majority of the accredited colleges
  • Tax-deferred income
  • No income limitations
  • Variety of investments options

 

Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other benefits that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

 

Michael McGinley, CFP ®
Comprehensive Wealth Manager | Tax Advisor
Chandler, AZ 85226