I guess my question is does the 529 sponsor report these contirbutions to the state? I don't know much about state deductions because my state doesn't have one. However, when you contribute to an IRA there is a report required (5498) by the custodian to the IRS. Is there an equivalent for this situation at the state level? I would think so, just for verification purposes. If there is a report and they send it to you than yes deduct it. If there is a report and you don't get it than it is some sort of management kick back??? If there is no report than I would call the AZ dept of revenue.
An IRA contribution would seem similar to me. You have to have the income to do it but it doesn't matter who funds the thing. My cousin could write a check to my IRA and I could deduct it on my 1040 (assuming I qualify). The IRS gets the 5498 showing a contribution and everything is fine.
Did the money get coded as a contribution or something else? Your proof can be the statements.
If you see no guidance anywhere and there are no specific report about this going to AZ than I would take the deduction. My argument would be 1) look at my statements (How would they even dig enough to wonder if they came from a credit card?) 2) YOU choose the cash back program set up in order to get the deduction. Otherwise, why would you not just pick a true cash back cc. Symantics really.