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Arizona Tax Credits: How to Control Your Tax Dollars

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December 1, 2019

Arizona Tax Credits - Everything You Need to Know

Don’t you just hate it when you don’t know where your taxes are going? While the only things certain in life are death and taxes, sometimes it’s frustrating not having a choice of where your taxes go.

But if you live in Arizona, where Bayntree is located, you actually do have a choice for your state taxes. Instead of simply cutting a check for your taxes, now, you can take part in the Arizona State Tax Credit program. This allows you to donate to an organization (or several) and earn a dollar-for-dollar credit against your Arizona taxes. In this post, I’ll cover everything you need to know about Arizona tax credits so you’re ready for the upcoming tax season.

You might be thinking… what is the Arizona State Tax Credit Program anyways?

‍It’s a program that allows you to donate to tax credit eligible organizations so that you end up in a neutral tax situation. Instead of just paying your Arizona taxes, you get to choose one of the pre-approved organizations to send your money instead. These organizations include funding schools, foster care, military, and more.

For example, let’s say you owe $1,000 in Arizona taxes. You can choose to pay the state of Arizona $1,000, or you can select one of the organizations below and contribute directly to them. This way, you know where every dollar of your taxes is being spent. You must have a tax liability for at least the amount of your donation in order to take a tax credit. In other words, if you only owe $1,000 to the state of Arizona, you cannot receive $2,000 in tax credits.

Here are a few more questions you may have regarding tax credits:

What Are the Contribution Amounts?

As of 2019, you can contribute up to the amount of your expected Arizona tax liability. Please remember, this isn’t related to your federal taxes but only your local, AZ taxes. Also, if you contribute more than your total state tax, you are legally allowed to carry the credit for five years.

What Are the Tax Credit Options?

Currently, there are six approved tax credit organizations for 2020. You can choose to send your money to one of them or spread it out amongst several organizations, depending on your total tax amount. Each organization has different limits depending on if you’re filing single or married. Here’s a breakdown of the six that are approved by the state of Arizona:

1. The Arizona Military Family Relief Fund Credit

To contribute to the Arizona Military Family Relief Fund, you can visit their website directly. The contribution amounts are $200 for single filers and $400 for joint filers. Unlike other funds on this list, there are two major differences with this organization. First off, they have a maximum of $1 million in total donations. If you do donate and they’ve reached their cap, you will receive your money back. Second, you need to submit your contributions by December 31st as opposed to April 15th like the other ones on this list.

2. Arizona Credit for Donations Made to Qualifying Charitable Organizations

The Department of Revenue provides an in-depth list of all qualifying charitable organizations. The contribution amounts are $400 for single filers and $800 for joint filers.Learn more about the qualifying charitable organizations here. Easy way to make your donation to the Qualifying Charitable Tax Credit

3. Private School Credit

With the AZ tax credit program, you can contribute to a private school of your choice. Make sure to view this list of certified organizations that can receive donations. To ensure credit is claimed, make sure to use form 323.The contribution amounts are $555 for single filers and $1,110 for married filers.

4. Additional “PLUS” Private School Credit

A law passed in 2012 made it so donors can now donate even more to private schools as well. Using form 348, you can contribute an additional $552 for single filers or $1,103 for joint filers.

5. Public School Credit

If you’d like to donate to a specific public school, make sure to search this list of all AZ schools.

‍The contribution amount is $200 for single filers and $400 for joint filers.

Make sure to visit each school’s website to learn how to make a donation.

6. Qualified Foster Care Charitable Organization (QFCO)

The final organization is any qualifying foster care organization on this list. To contribute, make sure to use form 352. The contribution amounts are slightly higher than most and are $500 for single filers and $1,000 for joint filers.

Easy way to make your donation to the Foster Care Arizona Tax Credit

When Do You Need to Contribute?

Just like your taxes, you have until April 15th to get your donations submitted. But as noted above, this is a general rule as not every organization has that deadline. For example, the Arizona Military Family Relief fund only allows you to donate up until December 31st and there is a maximum of $1 million in donations. Finally, once you contribute to your chosen organizations, make sure to print out a receipt for your records. You can then submit them to your tax professional and save for your tax records.

Summary

Instead of letting Arizona dictate where your state taxes are going, feel free to take advantage of the AZ tax credits mentioned above. This is a phenomenal way to control your tax destiny and help the approved organizations. If you have any questions about this or want more information to help you in 2020, please contact us at Bayntree by scheduling a complimentary consultation.

Listen to the Your Wealth and Beyond Podcast to find out more about the Arizona Tax Credits

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Bayntree does not provide specific legal or tax advice. Please consult with your tax advisor or legal professional for guidance on your individual situation.

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