If you are an Arizona taxpayer (resident or non-resident), you are eligible for a $750 state income tax deduction for contributions to a 529 plan, $1,500 for those married filing jointly.
Additional tax benefits include:
- Earnings grow tax-free.
- Distributions to pay qualified education expenses are tax-free.
- Participants also benefit through tax-free gifting. Account owners can make annual gifts of up to $13,000 single and $26,000 joint to a designated benefifiary for all accounts without incurring federal gift tax. For contributions over the limit, you may treat the money (up to $65,000 single and $130,000 joint) as having been made ratably over a five-year period.
- Assets in a 529 account are not treated as part of the federal taxable estate of the account owner who is not a designated beneficiary.