Lawmaker: Keep tax deductions for college savings plans
PHOENIX — A lawmaker wants to make permanent a state program that allows Arizonans to deduct contributions to college savings plans from their taxable income.
Individuals currently are allowed to deduct up to $750 per year, while married couples filing jointly are allowed to deduct $1,500 per year. But that provision is scheduled to expire Jan. 1.
SB 1196, authored by Sen. Steve Yarbrough, R-Chandler, would extend the deductions into perpetuity.
The bill cleared the Senate without opposition and received a unanimous endorsement Wednesday from the House Higher Education, Innovation and Reform Committee.
Many states and educational institutions offer savings plans under Section 529 of the Internal Revenue Code. Arizona’s is called the Arizona Family College Savings Plan.
Earnings in the savings accounts grow tax-free, and withdrawals used for qualified higher education expenses aren’t subject to federal taxes.
Don Isaacson, a lobbyist representing the University of Phoenix, said the deduction allows Arizonans to be financially savvy.
“This provision has been around for five years, and what it gives to Arizona families is a tax-beneficial way to save money for their children as college students,” Isaacson said.
April L. Osborn, executive director of the Arizona Commission for Postsecondary Education, said the program allows middle class families who don’t qualify for federal financial aid to save money.
“The deductible isn’t much money, but people are savvy and recognize that each tax deduction lets their money grow further,” Osborn said. “It’s a great way to grow a nest egg.”