Arizona 529 tax deduction in 2026
Arizona multiplies its cap by the number of children and does not care which state runs the plan.
Arizona tax saved on this contribution
$300
2.5 % of what you put in comes back on your 2026 return.
| Subtracted from state income | $12,000 |
| Your state marginal rate | 2.50 % |
| Cap that applies this year | $12,000 |
| Back per $1,000 contributed | $25 |
Arizona: Subtraction of contributions to any state's 529 plan up to $2,000 per beneficiary (single/head of household) or $4,000 per beneficiary (married filing jointly; MFS spouses share $4,000 per beneficiary); rollovers are not deductible. Read on 2026-10-19. No federal deduction exists for 529 contributions.
| Taxable income | Marginal rate | Tax saved |
|---|---|---|
| $50,000 | 2.50 % | $300 |
| $100,000 | 2.50 % | $300 |
| $200,000 | 2.50 % | $300 |
| $400,000 | 2.50 % | $300 |
Worked out by Radif Partners · How we calculate · Arizona rule read on October 19, 2026, brackets of tax year 2026 · not tax advice
Arizona lets a taxpayer subtract up to $2,000 of 529 contributions per beneficiary on a single return, or $4,000 per beneficiary on a joint one, and the money can go to any state's 529 plan, not only AZ529. With the flat 2.5 % rate, each deducted dollar is worth the same at every income: a couple at $135,000 who put $12,000 across three children deduct all of it and save $300. A single parent with two children reaches a ceiling of $4,000. Rollovers in are not deductible. On the way out Arizona is mild: a nonqualified withdrawal adds back only earlier Arizona subtractions, and a rollover to another plan or a change of beneficiary is expressly not a nonqualified withdrawal. State law treats K-12 costs up to $20,000 and student loan payments as qualified, and the AZ529 balance limit read for this page is $0.
| Benefit for contributions | Deduction |
|---|---|
| Cap | $2,000 single, $4,000 joint per child, per taxpayer |
| Another state’s plan counts | Yes (tax parity) |
| State plans (official names, no recommendation) | AZ529, Arizona's Education Savings Plan |
| K-12 withdrawals qualified for state tax | Yes |
| 529 to Roth IRA rollover qualified | Yes |
| Student loan payments qualified | Yes |
| Add-back on a rollover to another state’s plan | No |
A cap that grows with the family
Paragraph 19 of A.R.S. 43-1022 sets the subtraction per beneficiary. Each child on whose account you contribute opens another $2,000 of room for a single filer, another $4,000 for a married couple filing jointly. Couples who file separately share the $4,000 for each child. For a family with three children the joint ceiling is $12,000, which is why the couple in the calculator above deducts every dollar of $12,000.
The flat 2.5 % rate keeps the arithmetic short. The per-dollar return is $25 per $1,000, so the saving is modest even at the cap: $300 for those three children. A single parent at $58,000 who puts $5,000 toward two children counts $4,000 and saves $100. Change the number of children and watch the cap move.
Arizona cap by number of children
Arizona tax saved on this contribution
$100
| Subtracted from state income | $4,000 |
| Your state marginal rate | 2.50 % |
| Cap that applies this year | $4,000 |
| Back per $1,000 contributed | $20 |
Grandparents count too
The limit is counted per taxpayer and per beneficiary, so each person who contributes has a separate ceiling for the same child. A grandmother at $70,000 who adds $3,500 to a grandchild's account sits inside her own $2,000 for that child and saves $50 on her return. The texts read for this page do not say whether she must also own the account.
Parity: no in-state penalty
Arizona allows the subtraction for a contribution to any section 529 college savings plan, a rule both the 2025 Form 140 instructions and the AZ529 FAQ repeat. Choosing a plan from Nevada or Utah costs nothing on the Arizona return: over eleven years the gap for a couple putting in $4,000 a year is $0. Fees and investments are the whole comparison. AZ529 itself comes in the two versions listed in the fact table; their exact marketed names were not confirmed on the state pages read.
AZ529 or another state plan
Lost by leaving the Arizona plan
$0
| Yearly saving, home plan | $100 |
| Yearly saving, other plan | $100 |
| Gap over the years | $0 |
Leaving costs little
Under A.R.S. 43-1021, a nonqualified withdrawal that is not already in federal income must be added back, but only up to the Arizona subtractions taken before and not yet recaptured. A.R.S. 15-1871 says a rollover and a change of beneficiary are not nonqualified withdrawals, so moving the account elsewhere triggers nothing. The same section lists K-12 costs up to $20,000 and student loan payments as qualified and ties qualified expenses to section 529 as amended in 2025, which brings in credential programs.
A Roth IRA rollover is described by the State Treasurer as free of any tax, though the statute does not mention Roth rollovers by name.
Two figures to watch
The Department of Revenue states the 2.5 % rate for 2023 and later. A 2026 bill proposing a higher rate on incomes above a million dollars was not confirmed as enacted. The $0 balance limit applied through September 30, 2026; the limit from October 1, 2026 was not found on the AZ529 pages read.