The State of Arizona Individual Income tax return allows a deduction for contributions to qualified Section 529 accounts with a maximum deduction amount of $2,000 for Single (Head of Household-HofH) and $4,000 for Married Filing Joint (MFJ) filers.

The State of Arizona recently passed amendments to these maximum deduction amounts for contributions to 529 accounts.  With the tax year starting January 1, 2021, the new Arizona deduction maximums for contributions to a qualified 529 account is:

• $2,000 PER BENEFICIARY for Single of HofH filers
• $4,000 PER BENEFICIARY for MFJ filers

For example, if a MFJ couple contributes $5,000 ($10,000 total) to each of their two children’s 529 accounts before 2021, the maximum total Arizona deduction allowed would have been $4,000.  Beginning January 1, 2021, the maximum AZ deduction is $8,000 ($4,000 for each child’s 529 account).

This bill also provided a similar deduction for contributions to a qualified ABLE account.

If you have any questions, please reach out to your advisor for further clarification.