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ARIZONA STATE SENATE
Fifty-Fifth Legislature, First Regular Session
ENACTED
FACT SHEET FOR S.B. 1844/H.B. 2918
taxes; 529 contributions; ABLE contributions.
Purpose
Applies the Arizona adjusted gross income subtraction for college savings plan contributions authorized by section 529 of the U.S. Internal Revenue Code (U.S. IRC) to the contributions made on behalf of each beneficiary. Allows Achieving a Better Life Experience (ABLE) account contributions authorized by section 529A of the U.S. IRC made on behalf of a designated beneficiary to be subtracted from an individual's Arizona adjusted gross income in specified amounts.
Background
Individual income tax is levied on Arizona residents’ taxable income and uses a graduated rate structure, based on the taxpayer’s income level. Current statute authorizes various amounts to be added or subtracted when computing an individual's Arizona adjusted gross income. Subtractions include the amount contributed to a college savings plan authorized by section 529 of the U.S. IRC (529 Plan) during the taxable year to the extent that the contributions were not deducted in the computation of a taxpayer's Federal adjusted gross income. The amount subtracted may not exceed $2,000 for a single individual or a head of household (HOH) or $4,000 for a married couple filing jointly (A.R.S. § 43-1022).
If allowing 529 Plan and ABLE account contributions to be subtracted from an individual's Arizona adjusted gross income results in a change to the aggregate income tax liability, there may be a fiscal impact to the state General Fund.
Provisions
1. Allows 529 Plan contributions made on behalf of a designated beneficiary to be subtracted from an individual's Arizona adjusted gross income in the following amounts:
a) $2,000 per beneficiary, rather than only $2,000, for an individual or a HOH; or
b) $4,000 per beneficiary, rather than only $4,000, for a married couple filing jointly.
2. Allows ABLE account contributions authorized by section 529A of the U.S. IRC made on behalf of a designated beneficiary to be subtracted from an individual's Arizona adjusted gross income in the following amounts:
a) $2,000 per beneficiary for an individual or a head of household; or
b) $4,000 per beneficiary for a married couple filing jointly.
3. Prohibits, in the case of a married couple filing separate returns, the total ABLE Account contribution subtraction from exceeding $4,000 per beneficiary.
4. Makes technical changes.
5. Becomes effective on the general effective date, retroactive to taxable years beginning January 1, 2021.
3rd Read 6/24/21 18-12-0 3rd Read 6/28/21 41-17-2
(S.B. 1844 was substituted for H.B. 2918 on 3rd Read)
Signed by the Governor 6/30/21
Chapter 395
Prepared by Senate Research
July 20, 2021
MG/gs