Arizona 529 Plan And College Savings Options
Arizona has two 529 plans called the Fidelity Arizona College Savings Plan and the Arizona Family College Savings Plan that can help you save for college. Arizona also has a 529 Able Plan as well.
If you live in Arizona, these might be good options for you to save for college.
These programs are designed to help make college more affordable - so that you can get the education you need. By saving for college early on, you can make paying for college easier down the road.
If you're not quite sure how 529 plans work, check out this starter guide to What Is a 529 Plan?
There is also a specific order of operations to save for college that we recommend families follow. These programs are specific to the State of Arizona. Each state has different rules when it comes to 529 plan savings.
Average Cost Of College In Arizona
When saving for college in Arizona, it's important to take into consideration the cost of attendance in the state. If you choose to go to an out-of-state school, you need to look at the average cost of attendance in that state.
There are 140 colleges and universities in the State of Arizona.
The total average cost of college (Cost of Attendance) in Arizona for in-state residents is $21,161 for 2020. This includes tuition, room and board, books and supplies, and other expenses.
For just tuition alone, the average undergraduate tuition for in-state residents is $5,180 for 2020. The cost of tuition in Arizona has been rising fast - upwards of 20% per year over the last few years.
See how this compares to the average cost of college here. Keep in mind the average student loan debt by graduating class here.
Explore the data here.
Arizona 529 Plan Tax Information
Tax savings is one of the big benefits of using a 529 plan to save for college. On a federal-level, there is no tax savings for contributions, but qualified distributions are tax-free.
Here are the special tax benefits and considerations for using a 529 plan in Arizona.
Arizona offers a state tax deduction for contributions to a 529 plan of up to $2,000 for single filers and $4,000 for married filing jointly tax filers.
Note: Arizona is one of the few states that allows this tax deduction for contributions to both the Arizona and non-Arizona 529 Plans.
Minimum: There is no minimum contribution.
Maximum: Accepts contributions until all account balances for the same beneficiary reach $519,000.
Rollovers into the state plan are allowed but not considered for the state tax deduction.
Outbound rollovers are exempted from the non-qualified penalties and income tax deduction recapture.
Qualified distributions from both an Arizona and non-Arizona 529 plan are tax-free.
Arizona does conform with Federal law in regards to using a 529 plan for K-12 tuition. See this guide: Using a 529 Plan For Elementary and High School Private Education.
Arizona does conform with Federal law for using a 529 plan for student loans. You can withdraw up to $10,000 one-time to pay down student loan debt.
Non-Qualified Distributions Taxes, Penalties, Recapture
A non-qualified withdrawal will result in the principal portion to be included in Arizona taxable income to the extent of prior Arizona tax deductions. Furthermore, gains are subject to ordinary income tax and a penalty.
Arizona 529 College Savings Plan Options
Arizona has several 529 plan options - two consumer plans and one plan that is sold by financial advisors (we're big advocates of doing-it-yourself, you don't need to pay a financial advisor for this).
Fidelity Arizona College Savings Plan
The Fidelity Arizona College Savings Plan is the name of one of Arizona's 529 Plan. This plan offers a variety of investment options, including age-based portfolios that become more conservative as the child approaches college, and static investment fund options.
The funds offered include Fidelity Investments.
There is a program management fee of 0.09% to 0.14% depending on investments.
The underlying funds all charge expense ratios from 0.05% to 0.95% depending on the investment option.
Total fees would range from 0.11% to 0.99%.
Who Should Use It:
We recommend that Arizona residents use the Fidelity Arizona College Savings Plan 529 plan due to the tax benefits, low fees, and plan investment options.
We recommend that out-of-state residents utilize other plans, since the tax deductions still applies.
Arizona Family College Savings Plan
The Arizona Family College Savings Plan is the name of the other of Arizona's 529 Plan. This plan offers a banking and savings account approach to college savings - with no risk, but low growth.
This program only offers short term CD options, or a high yield savings account.
This plan may be helpful for those approaching college and need little to no risk, but isn't suitable for families who have a long time horizon.
This plan also has a higher minimum deposit requirement at $250.
Arizona 529 Able Plan Options
529A Able accounts are accounts designed to help those with disabilities escape poverty and save for themselves. Learn more about 529A Able Plans here.
The AZ Able is a 529A plan open to all residents in Arizona (the plan is actually administered by the State of Ohio).
This plan allows contributions of up to $15,000 per year from all sources.
It does have a minimum initial contribution amount of $50 per account.
The plan does have an account maintenance fee of $42 annually, assessed at $3 per month. It also has a program management fee of 0.19%.
You can open an AZ Able account here.
Other Programs To Save For College
A 529 plan is one way to save for college. Remember, we have a full guide on our approach to college savings here - and it helps you find other options.
If you're looking for ways to boost your college savings, check this out:
CollegeBacker is one of our favorite ways to save for college because they make gifting for college so easy. You can setup an account, link your 529 plan (in most states), and get a unique URL that you can share with friends and family to save for your children's college.
Plus, they have Backer Bucks, which allow you to earn rewards and rebates for the shopping you already do - directly deposited into your children's 529 plan.
Upromise is another awesome tool to help you save for college because they have a lot of ways that you can earn money for your 529 plan. You can get rebates and rewards, and you can get cash back into your child's 529 plan by using the Upromise credit card.
Arizona Financial Aid
Using a 529 plan isn't the only way to save money for college. Each state typically offers a variety of financial aid programs for their residents. These include scholarships and grants, and sometimes unique forgivable student loan opportunities.
Check out the list of Arizona Student Loan and Financial Aid Programs.
Return to the full list of 529 Plans By State.