Do you know what AZ529 is about?
Arizona’s Education Savings Plan is a state-sponsored 529 plan designed to provide a parent, grandparent or future students an opportunity to save for educational expenses in a tax-advantaged manner. You can open an account today for as little as $15 a month.
From tax benefits to eligible expenses, it's a smart way to invest in your child's future education.
What is a AZ529 account?
How much can you invest yearly?
Arizona’s Education Savings Plan is Arizona’s version of the savings plans permitted under IRS code section 529. These plans are designed to encourage individuals to save for future education expenses. The Office of the Arizona State Treasurer is the state agency that administers the program. Additional information can be found in the AZ529 Investment Policy Statement.
Effective September 29, 2021, for Tax Year 2021 and after, the state of Arizona offers a tax deduction each year for investing in the Arizona 529 Plan or any state’s 529 plan of up to $4,000 per beneficiary for married tax filers who file a joint return and up to $2,000 per beneficiary for individual tax filers. There is no limit on the number of beneficiaries Arizona residents can make contributions to in a tax year.
What can the funds be used for?
The 529 program was originally designed to pay for qualified postsecondary education expenses.
These include:
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tuition and fees
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books
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supplies and equipment including computer technology, related equipment and software, as well as internet access or related services used by the student while enrolled at an accredited postsecondary institution.
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Students who are enrolled at least half-time may also use funds saved in a 529 account for room and board expenses.
In December 2019, the SECURE Act was signed into law, which expanded the approved use of 529 funds to include:
a) expenses for fees, books, supplies, and equipment required for participation in an apprenticeship program registered and certified with the Secretary of Labor under section 1 of the National Apprenticeship Act (https://www.apprenticeship.gov/apprenticeship-finder), and
b) qualified student loan repayments, up to a lifetime maximum of $10,000 per beneficiary.
The Federal Tax Cuts & Jobs Act signed into law in late December 2017 added an additional category of expenses for which 529 funds may be used: Qualified withdrawals from 529 accounts are free of federal and state taxes. Account owners of 529 plans can now treat withdrawals used for public, private, and religious K-12 tuition expenses as qualified withdrawals, up to $10,000 per calendar year for each beneficiary.
What if my child doesn't go to college?
Effective January 1, 2024, qualified “leftover” AZ529 account funds may be transferred to a Roth IRA free of any tax, penalty or applicable income limits. So, your tax-free 529 withdrawals of funds invested can begin as early as kindergarten for the designated beneficiary and can continue even beyond graduate school to their Roth IRA in retirement!
The transfer or distribution from the 529 account must occur after December 31, 2023. The 529 account also must have been maintained for a minimum of 15 years, with the same owner and same designated beneficiary. The amount being transferred must also have been contributed at least five years prior to such transfer and the aggregate lifetime limit that can be rolled over is $35,000.
