When faced with a balance due for state taxes, Arizona taxpayers have a choice on how they want those tax dollars to be used. Of course, they can simply pay the state. But more and more of our clients are exercising their ability to choose where their financial resources make an impact.
Do you have a passion for helping kids in the foster care system, sheltering animals in need, or supporting after school programs for students? Arizona Tax Credits allow taxpayers to use their money to support the causes they care about.
Arizona Tax Credits offer a dollar-for-dollar reduction of state income tax. That means that each dollar you donate reduces your tax burden by an equal amount. Taxpayers can completely wipe out their Arizona tax balance up to $4,635 for married couples filing jointly or $2,319 for individuals (as of 2021) by donating their tax liability to a qualified charitable organization.
What do I need to know about Arizona Tax Credits?
Donations must be made to qualified charities.
- The list of organizations eligible for the credits varies slightly each year, so it is important to verify the status of the organization before writing a check. Churches and other religious organization are never eligible for the credit.
Donations used for the credit cannot be deducted on your federal tax return.
- Since 2018, the federal government has closed this option. Keep in mind that while charitable donations on the federal level are a deduction that lowers your taxable income, tax credits directly lower the amount of tax that you owe.
Donations must be split across four categories to utilize the full amount (MFJ / Single limits):
- Private Schools: $2,435 / $1,219
- Qualified Charitable Organizations: $800 / $400
- Qualified Foster Care Organizations: $1,000 / $500
- Public Schools: $400 / $200