The Arizona Tax Credit allows taxpayers (that’s you!) to make charitable contributions and receive dollar-for-dollar reductions in their Arizona state tax liabilities.
The good news is that you don’t need to know the ins and outs of the credit to take full advantage of it. But if you’re curious, keep reading as we break it down for you.
Disclaimer: You should always consult with your tax advisor for advice on your specific tax situation.
What is the Arizona Tax Credit?
The Arizona Charitable Tax Credit is a set of two nonrefundable individual income tax credits for charitable contributions to Qualifying Charitable Organizations (QCOs) and Qualifying Foster Care Charitable Organizations (QFCOs).
Maximum allowable credit for contributions are as follows:
- QCO: $400 individual/$800 couples filing jointly
- QFCO: $500 individual/$1,000 couples filing jointly
Here are some guidelines for using the AZ Tax Credit:
- Donations must be made by individuals. Companies, foundations, partnerships, etc. do NOT qualify.
- Donations must be made in cash. In-kind donations do NOT qualify.
- Donations must be made to qualifying organizations that have been certified by the state of AZ.
- Any credits that are not applied against tax obligations for the most recent taxable year to be carried forward for a period of five consecutive years
How to claim the Tax Credit
- Donate to a qualifying organization
- Keep the receipt to show proof of your donation
- Complete the tax form to claim your credit (Arizona Form 321 for gifts to QCOs, and/or Arizona Form 352 for gifts to QFCOs)
- Calculate your tax credit against your tax liability
So what does this mean for taxpayers? It means CONTROL!
Let’s say you give $400 to an eligible Qualifying Charitable Organization and $500 to a Qualifying Foster Care Charitable Organization. You can claim both of these credits, effectively redirecting $900 of your state tax payment to the charities of YOUR choice. You have control over where your money goes.
Arizona taxpayers do not need to make their charitable contributions to QCOs and QFCOs before December 31 of a given year in order to be eligible for state tax credits for that tax year. The state of Arizona allows taxpayers to claim tax credits for gifts through April of the current year for the prior tax year.
IRS deadlines are different from Arizona’s state deadlines, however. The IRS specifies that, in order for contributions to be deductible on federal tax returns, contributions must be made “by the end of your tax year.”
There you have it. Take this information and apply it on your next tax return to control how a portion of your tax dollars are spent.