Arizona Tax Credits: Opportunities for Local Compassion
The increase in the federal standard deduction for individual taxpayers has resulted in fewer people itemizing deductions, including charitable contributions. However, Arizona taxpayers can still contribute to several Arizona charities and schools and receive a dollar-for-dollar tax credit to offset Arizona’s personal income tax liabilities.
These credits are available regardless of whether the taxpayer itemizes deductions, or takes the standard deduction, on the federal return.
Qualifying Charitable Organizations and Qualifying Foster Care Organizations Credits
Organizations certified as Qualifying Charitable Organizations include those that provide services to low-income Arizona residents or children with chronic illnesses and disabilities. Organizations certified as Qualifying Foster Care Organizations include those that provide services to low-income and disabled children in the foster care system.
Each credit has separate maximums and is reported on separate forms.
The 2019 limits are:
- Qualifying Charitable Organizations (claimed on Arizona Form 321):
- $400 single, head of household, and married filing separately
- $800 married filing jointly
- Qualifying Foster Care Organizations (claimed on Arizona Form 352):
- $500 single, head of household, and married filing separately
- $1,000 married filing jointly
For more information and a link to the list of qualifying organizations, please see the Arizona Department of Revenue Pub 710 and website.
Public School Tax Credit
The public school tax credit helps students offset the cost of extracurricular activity fees at Arizona public and charter schools. Taxpayers are not required to have a child attend the school to donate and take the credit (Arizona Form 322).
The 2019 limits are:
- $200 single, head of household, and married filing separately
- $400 married filing jointly
For additional information, please see Arizona Department of Revenue Pub 707.
Private School Tuition Organizations Credits
An individual may claim a credit for contributions made to a qualified school tuition organization, which are used to fund student scholarships at private schools. Taxpayers must make cash or payroll withholding contributions to qualify. The taxpayer’s child cannot be designated as the direct beneficiary of the funds, nor can the taxpayer “swap” contributions for the benefit of other parents’ children.
There are two credits available. Once credit for contributions to Private School Tuition Organizations hits its ceiling, taxpayers may then make contributions to Certified School Tuition Organizations and claim that credit, as well.
The limits for tax year 2019 are:
- Contributions to Private School Tuition Organizations (claimed on Arizona Form 323):
- $569 single, head of household, and married filing separately
- $1,138 married filing jointly
- Contributions to Certified School Tuition Organizations (claimed on Arizona Form 348):
- $566 single, head of household, and married filing separately
- $1,131 married filing jointly
An S-Corporation that qualifies may also elect to pass through credits to individual shareholders. Additional rules and forms apply. Taxpayers who receive the S-Corporation pass-through credits may still max out the Form 323 and Form 348 credits.
For additional information, please see Arizona Department of Revenue Pub 707.
Arizona Tax Credits: Reminders and Deadlines
Each of these non-refundable credits is applied up to the amount of the tax liability and will either increase the refund or decrease the amount owed once you file the return. You can carry forward unused credits for up to five years.
The deadline for donations is on or before the 15th day of the fourth month following the close of the taxable year. Therefore, you may claim contributions made between January 1, 2020 and April 15, 2020 as credits on 2019 or 2020 Arizona tax returns. Make sure the organization provides a receipt for your donation, and keep this for your records and tax return preparation.
Please let us know if you have any questions about these Arizona tax credits. We would be happy to review these credits with you and/or your tax professional.
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