State tax filing

My point in asking is that i do not see anything in the tax code that states the in and out of state contributions should be treated as a total.

I've copied the tax code into ChatGPT, and have been interrogating it there. It has some compelling arguments that make me believe my assumption is correct. Unless have missed something else.

Here's one of the responses I got for reference:

That’s a fair perspective, and I understand why someone might interpret the statute that way. However, the text of the law does not indicate that the deduction is an either-or situation. Here’s why:

1. The Law Allows Deductions for Both In-State and Out-of-State 529 Plans

• § 6-84-111(e)(1)(A) explicitly states:

  "For tax years beginning on and after January 1, 2021, contributions to a tuition savings account established under the plan or a tax-deferred tuition savings program established by another state under 26 U.S.C. § 529, as in effect on January 1, 2020, may be deducted from the taxpayer's adjusted gross income for the purpose of calculating Arkansas income tax under § 26-51-403(b)."

• This sentence confirms that both types of contributions are deductible—it does not say a taxpayer must choose one or the other.

2. The Law Uses Separate Deduction Limits

• § 6-84-111(e)(2)(A) applies to Arkansas 529 contributions, capping them at $5,000.
• § 6-84-111(e)(2)(C) applies to out-of-state 529 contributions, capping them at $3,000.
• If the intention were to force a choice, the law should have stated something like:
  "A taxpayer may deduct up to $5,000 in total, including both in-state and out-of-state contributions, but no more than $3,000 from an out-of-state plan."
  It does not say this. Instead, it sets two distinct limits.

3. The Carryforward Rules Apply Separately

• § 6-84-111(e)(2)(B) allows carryforward of excess Arkansas 529 contributions for up to four years.
• The carryforward rule does not apply to out-of-state 529 contributions, meaning the law treats these as separate categories.
• If out-of-state contributions were just an alternative to in-state contributions, why wouldn’t they also have a carryforward provision?

4. The Either-Or Argument Would Make (e)(2)(C) Redundant

If the total deduction was limited to $5,000, then (e)(2)(C) would have no purpose because:

• A taxpayer who contributed $5,000 to an Arkansas 529 would already hit the cap.
• A taxpayer who contributed $3,000 to an out-of-state 529 would still have $2,000 unused deduction room, but they wouldn't be allowed to contribute more to take advantage of it.
• The law could have just said: "Taxpayers may deduct up to $5,000 in total for contributions to any 529 plan." But it does not say that.

5. The Lack of Express "Either-Or" Language

• Many tax codes that require an either-or choice use explicit language to state the limitation.
• Arkansas does not say, "A taxpayer may deduct either up to $5,000 for an Arkansas 529 or up to $3,000 for an out-of-state 529, but not both."
• Instead, it sets two independent limits.

6. The Most Logical Interpretation

The law clearly allows:

• Up to $5,000 in deductions for Arkansas 529 contributions.
• Up to $3,000 in deductions for out-of-state 529 contributions.
• The absence of an explicit overall cap means that these two deductions can be combined.

Final Answer

Your total deduction is not limited to $5,000. You can deduct $5,000 for an Arkansas 529 plus $3,000 for an out-of-state 529, for a total deduction of $8,000.

If someone argues otherwise, they must point to an explicit provision in the tax code that imposes a $5,000 total cap, which does not appear to exist.

Would you like help drafting a response to the person challenging your interpretation?