Arizona Tax Credits for High-Income Earners

The Arizona tax credit programs may allow taxpayers to direct a portion of their state income tax liability to eligible schools, nonprofits, and community organizations. Instead of paying the full amount to the Arizona Department of Revenue, you may be able to allocate some of those dollars to programs that reflect your interests and priorities — subject to eligibility and program rules.

For many households, these credits offer a structured way to support the community while meeting an existing tax obligation.

Why the Arizona tax credit system matters for high-income filers

Most tax benefits reduce taxable income rather than tax liability. Arizona’s system is different: certain qualifying contributions may reduce your state income tax liability directly.

For example, a $400 credit may reduce the amount of tax you owe by up to $400, depending on your circumstances.

For individuals whose income may fluctuate due to bonuses, RSU vesting, business income, or K-1 distributions, the ability to apply specific and predictable credits each year can provide additional planning flexibility.

How Arizona’s dollar-for-dollar credits work

Arizona offers several categories of individual income tax credits tied to specific programs, including:

• Qualifying Charitable Organizations (QCOs)
• Qualifying Foster Care Charitable Organizations (QFCOs)
• Public schools
• Certified School Tuition Organizations (STOs)
• Military relief funds

Key considerations:

• Itemizing is not required. You may claim these credits even if you use the standard deduction.
• Timing matters. Contributions made by April 15 may be applied to the prior tax year.
• Credits may carry forward. Unused credits may be carried forward for up to five years.
• Individual credits may be used together. You may combine multiple credits so long as they do not exceed your total Arizona tax liability.
• Corporate credits operate separately. Personal and business credits do not overlap.

Limits for individual tax credits

Below are the maximum credit amounts for 2025:

• Qualifying Charitable Organization (QCO): $495 single / $987 married
• Qualifying Foster Care Organization (QFCO): $618 single / $1,234 married
• Public School Tax Credit: $200 single / $400 married
• Private School Tuition Tax Credit (Original STO): $769 single / $1,535 married
• PLUS / Switcher STO Credit: $766 single / $1,527 married
• Military Family Relief Fund (MFRF): $200 single / $400 married
  (Note: This fund has an annual statewide cap and may fill early.)

Below are the maximum credit amounts for 2026:

• Qualifying Charitable Organization (QCO): $506 single/$1,009 married
• Qualifying Foster Care Organization (QFCO): $632 single/$1,262 married
• Public School Tax Credit: $200 single/$400 married
• Private School Tuition Organization (Original STO): $794 single/$1,587 married
• PLUS / Switcher STO Credit: $782 single/$1,560 married
• Military Family Relief Fund (MFRF): $200 single/$400 married
  • (Note: This fund has an annual statewide cap and may fill early.)

Stacking credits

Taxpayers may be able to use multiple credits in the same year, provided the total does not exceed their state tax liability. Credits that exceed liability may be carried forward for up to 5 years.

In 2025, a married couple filing jointly may be able to apply up to $6,083 in combined individual credits, depending on their Arizona tax liability. In 2026, the potential combined individual credits increase to $6,218.

Corporate credits remain separate from personal credits.

Corporate tax credits

For business owners, Arizona offers additional opportunities to direct corporate income tax through certified School Tuition Organizations (STOs). Two primary programs are available:

1. Corporate Private School Tuition Tax Credit (A.R.S. § 43-1183)

Eligible corporations may contribute to certified STOs and receive a credit of up to 100% of the contribution amount, subject to statewide caps and ADOR pre-approval requirements.

For 2025, the statewide cap is scheduled to increase from approximately $158 million to $185 million. Funds support scholarships that help students access private education.

2. Corporate Disabled/Displaced Student STO Credit (A.R.S. § 43-1184)

This program allocates approximately $6 million annually to support students with disabilities, children in foster care, and students transitioning from public to private schools.

Contributions may qualify for a credit of up to 100%, subject to eligibility and ADOR pre-approval.

Important Note: Corporate credits require pre-approval from the Arizona Department of Revenue. Coordination of timing and documentation is important to maintain eligibility.

Key rules to keep in mind

Arizona’s system is structured but accessible. A few guidelines may help simplify planning:

• You do not need to itemize deductions to use these credits.
• Donations made by April 15 may be applied to the prior tax year.
• Documentation is essential. Keep receipts from each qualifying organization.
• Credits may carry forward for up to five years if they exceed your tax liability.
• Private-school credits must go through certified STOs. Direct donations to private schools do not qualify.
• Corporate credits require pre-approval. Approval must be obtained before submitting corporate STO contributions.

Understanding these rules may help you structure a smooth and compliant tax-credit strategy.

Choosing qualified organizations

To claim Arizona tax credits, contributions must be made to organizations certified by the Arizona Department of Revenue, including:

• Qualifying Charitable Organizations (QCOs)
• Qualifying Foster Care Organizations (QFCOs)
• Certified School Tuition Organizations (STOs)
• Eligible public and charter schools

Selecting organizations is a personal decision. Many households choose to support organizations that reflect their values, demonstrate strong governance, and provide clear financial reporting.

With options across education, community services, crisis support, and foster care, Arizona’s credit framework may help taxpayers align their giving with causes that matter to them.

FAQ

What are the Arizona tax credit limits for 2025?
A married couple filing jointly may be able to apply up to $6,083 in individual credits, depending on tax liability. In 2026, the potential combined individual credits increase to $6,218.

Can high-income earners use Arizona tax credits?
Yes. There is no income cap for these programs.

Can I stack multiple Arizona tax credits?
Yes. Stacking is allowed as long as the combined credits do not exceed your Arizona tax liability.

Do I need to itemize to claim credits?
No. Credits may be claimed while using the standard deduction.

How long can unused credits carry forward?
Up to five years, subject to Arizona DOR rules.

Which organizations qualify for QCO or QFCO status?
Only organizations listed on the current Arizona Department of Revenue certification lists.

What is the Military Family Relief Fund?
A credit supporting Arizona military families. The statewide cap is limited and may fill early each year.

How do corporate credits work?
Corporations may contribute to certified STOs and receive a credit of up to 100%, subject to ADOR pre-approval.

Brighton Jones LLC is an SEC-registered investment adviser. Registration does not imply a certain level of skill or training. This material is for informational purposes only and is not intended to provide tax, legal, or investment advice. Tax laws are subject to change, and their impact may vary based on individual circumstances. Please consult a qualified professional regarding your personal situation.