The Arizona College

John P. Garcia

As a married father of two young children, my two primary financial concerns are will I be able to save enough money to be able to retire comfortably before age 70 and how will I be able to pay for my children’s college education. Sound familiar? Financial experts tell us that we should save for our own retirement first and any money left over should go towards saving for our children’s education. Well guess what, there isn’t any money left over. So, unless my children get scholarships because of their athletic prowess or their grandparents pony up the cash, somebody is going to need to take out a significant loan to pay for college, my children or me. But it doesn’t have to be that way. As of June 2005, Arizona added Fidelity Investments to its postsecondary educational savings account plan (529 Plan). This offering is called The Arizona Fidelity Plan (AFP). Through this plan offering, along with your support for an Arizona income tax deduction for Arizona 529 Plan contributions, it is possible to change the dream of funding our children’s college education into reality.

529 Plans In Brief

The 529 Plan is named after a section of the Internal Revenue Code known as Qualified Tuition Programs. Money invested in a plan grows tax-deferred and can be withdrawn tax free if used for higher education. All 50 states and the District of Columbia offer 529 Plans and they are open to anyone, including residents from other states.

How The Arizona 529 Plan Stacks Up

With the recent addition of Fidelity, a low cost industry leader, to Arizona’s provider lineup the state is a solid competitor in the 529 Plan market. One of the nice features about the AFP is that an account can be opened and maintained with as little as $50 a month. Further, Arizona offers a rock bottom one-time enrollment fee of $10, a comparatively high account balance allowance, and minimal state imposed restrictions.

The one area Arizona still falls short on is offering a state tax deduction. Currently, 26 states have a tax benefit for enrolling in their state 529 Plan. This benefit encourages its residents to invest in their children’s postsecondary education in the form of a state tax break. According to Dale Walters, Arizona Family College Savings Program Oversight Committee Chairman, “The linchpin that will make the Arizona 529 Plan attractive for its residents is a state tax benefit.”

What CPAs Can Do To Support Arizona’s 529 Plan

As Arizona CPAs, we play a unique and pivotal role in encouraging our state legislators to enact a state tax deduction for contributions to the Arizona 529 Plan. Interestingly, in 2003 the Arizona House Ways and Means Committee passed HB 2771, a bill that would have permitted Arizona taxpayers who itemize their deductions to claim a deduction of up to $500 per year for contributions to a 529 plan. Unfortunately, the bill did not garner enough support to become law.

We, as Arizona CPAs, can help make initiatives such as HB 2771 become law by writing to our local state representatives and asking them to support a state income tax deduction for contributing to the Arizona 529 Plan. Your local State Representatives contact information can be found at the Web Address: www.azleg.state.az.us.

Conclusion

Children are our future. They deserve every opportunity to have access to quality postsecondary education. Arizona CPAs have a unique opportunity to help Arizona’s children gain this access without burdening them and their families with large student loans. So, I urge you to send a short note to your State Representative asking them to support a state tax deduction for Arizona 529 Plan contributions, today.

Additional Useful 529 Plan Web Resources

www.az529.gov — This site contains information about The Arizona 529 Plan.

www.Fidelity.com/azplan —This site provides detailed information about the AFP including enrollment information.

www.savingforcollege.com — This site offers a wealth of information about 529 Plans throughout the United States.

John P. Garcia, CPA, is a member of the Arizona Family College Savings Program Oversight Committee.