Arizona Department of Revenue Publication 10 does not identify a tax program, credit, deduction, or distribution specifically called "Arizona State Tuition Distribution." The publication primarily addresses Arizona individual income tax rules, including income, deductions, credits, filing requirements, and other state tax provisions for withdrawals from 529 College Savings Plans.
Education‑Related Tax Benefits
- Federal Education Credits: Eligible taxpayers may be able to claim federal education tax benefits, such as the American Opportunity Credit and the Lifetime Learning Credit, on their federal income tax return.
- Arizona Education‑Related Credits: Arizona law provides certain education‑related tax credits and incentives. Taxpayers should review current Arizona tax forms and instructions to determine whether they qualify for any available education‑related credits.
Arizona Tuition Program Subtraction
If you are a beneficiary of a qualified state tuition program (IRC §529), you may subtract some of the amount distributed from the program for qualified education expenses.
- Include the amount of the distribution that you had to include in your federal adjusted gross income (AGI).
- This is an Arizona subtraction from income, not a tax credit, deduction, or distribution program.
Nonqualified Withdrawals – Addition to Income
A nonqualified withdrawal from a 529 College Savings Plan may be an addition to income. A nonqualified withdrawal is any withdrawal other than the following:
- Qualified withdrawal: A withdrawal from an account to pay the qualified higher education expenses of the designated beneficiary.
- Death or disability withdrawal: A withdrawal made as the result of the death or disability of the designated beneficiary.
- Scholarship withdrawal: A withdrawal made on account of a scholarship, allowance, or payment described in IRC §135(d)(1)(B) or (C), received by the beneficiary, but only to the extent of the scholarship amount.
- Rollover or beneficiary change: A rollover or change of designated beneficiary.
Important Notes
- Arizona’s subtraction applies only when a qualified distribution from a 529 plan is included in federal AGI.
- Nonqualified withdrawals may require an addition to income.
- Taxpayers should maintain records of all 529 plan distributions to support Arizona income tax adjustments.
- Adjustments are reported on the applicable addition or subtraction lines of the Arizona individual income tax return, as instructed in the current Form 140 Instructions.
Source:
Arizona Department of Revenue Pub 10
Form 140
Disclaimer: Always verify tax information with the official Federal or State Department of Revenue Forms and Instructions. This response is based on general information and may not reflect all current or applicable rules. For personalized advice, consult a CPA or tax professional.