Tax benefits for Arkansans through Arkansas Brighter Future 529 plans

Tax season may not be the most exciting time of year, but it can come with some silver linings — like the opportunity to save for your loved one’s education while also scoring some valuable tax benefits. An Arkansas Brighter Future 529 plan can help you prepare for future educational costs, while keeping more hard-earned money in your pocket.

Administered by the Arkansas Treasurer of State’s office, this educational savings program allows contributions to grow tax-deferred through a variety of investment options.

Whether saving for a child, grandchild or loved one, this plan offers a flexible and tax-efficient way to prepare for future education costs. These accounts are designed to accelerate educational savings while providing immediate tax benefits. Contributions grow tax-free, meaning the account’s earnings are not subject to federal or state income tax when used for qualified educational expenses. Brighter Future 529 funds can be used at eligible institutions nationwide, including two- or four-year universities, community colleges, technical schools, apprenticeship programs and even for student loan repayments.

With education costs continuing to rise, having a structured savings plan in place can ease the financial burden while maximizing tax advantages.

Arkansas taxpayers: Investing in a Brighter Future 529 account provides immediate access to multiple state tax benefits, including:

• Contributions to a Brighter Future 529 account are eligible to deduct up to $5,000 (up to $10,000 for married couples making a proper election) from your Arkansas adjusted gross income in the taxable year.
• For contributions over $5,000 per Arkansas taxpayer ($10,000 per married couples) made in a tax year, the deduction may be carried forward to the next succeeding four tax years.
• Rollover contributions up to $7,500 per Arkansas taxpayer ($15,000 per married couple) into the account from a tax-deferred tuition savings program established in another state are tax deductible in the tax year in which the contribution was rolled over into a Brighter Future 529 account.
• Qualified withdrawals from a Brighter Future 529 account are currently tax-free for Arkansas taxpayers.

Besides state tax benefits, the Arkansas Brighter Future 529 Plan offers several key federal tax advantages:

• Contributions to a Brighter Future 529 account are considered complete gifts and are eligible for the annual exclusion from the federal gift and generation skipping transfer tax. For the current 2024 tax season, the amount per designated beneficiary is $18,000 for single individual, $36,000 for married couples or up to $90,000 for spouses in a single five-year period.
• Qualified withdrawals from a Brighter Future 529 account are exempt from federal income taxes. The assets of the account must be used to pay for qualified expenses, such as K-12 tuition, student loan repayments or apprenticeship expenses of the beneficiary.

Arkansas employers: There’s a tax perk for you.

Arkansas employers can take advantage of tax incentives by contributing to their employees’ 529 accounts. Employers can receive a business tax deduction of up to $500 per each employee match into an Arkansas Brighter Future 529 account. This deduction is per employee, per year.

Brighter Future 529 plans give individuals a way to save for education while building a strong financial foundation. Whether your loved one aspires to attend a two- or four-year university, vocational school or needs assistance with other educational expenses, these accounts offer flexibility and peace of mind. No matter how plans change, a Brighter Future 529 account remains a valuable tool for educational savings. Funds can be used at any time, account holders have the freedom to adjust contributions, set goals or easily make a qualified withdrawal from the account.

With the Arkansas Brighter Future 529 Plan, you can maximize your savings through valuable tax benefits while building a strong financial foundation for your loved ones’ educational goals. To learn more or open an account, visit brighterfuturedirect529.com today.

Editor’s note: Fran Jansen is the director of 529 Programs & Financial Education in the office of Arkansas Treasurer of State John Thurston. The opinions expressed are those of the author.