Tax Insights

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Changes: state tax credit and federal charitable deduction

state, tax credit, Arizona, charitable, federal, deductionWe don’t get to say this too often… breaking news!

The IRS is out with new proposed rules limiting charitable donations and state tax credits and you need to act fast to receive the maximum tax benefit. Arizona has several state tax credits that have also qualified as a federal charitable tax deduction, potentially helping you receive a larger Arizona refund while reducing your federal tax liability. Now, that may be changing.

Under the proposed regulations, you would need to make any donations before Tuesday, August 28 to get BOTH the federal charitable deduction and the Arizona $1 for $1 tax credit. Again, these rules aren’t final, but it’s best to make your donations before this new deadline – to remove the uncertainty.

Note: If you claim the 2018 Standard deduction of $12,000 Single/$24,000 MFJ instead of itemizing deductions, this law change will not affect you.

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Here are the Arizona $1 for $1 qualifying credits:

  • Credit for Contributions to a Qualifying Charitable Organization
    • $400 Single
    • $800 Married filing joint (MFJ)
  • Credit for Contributions to a Qualified Foster Care Organization
    • $500 Single
    • $1,000 MFJ
  • Credit for Contributions Made or Fees Paid to Public Schools
    • $200 Single
    • $400 MFJ
  • Credit for Contributions to Private School Tuition Organizations
    • $555 Single
    • $1,110 MFJ
  • “Switcher” Credit to Certified School Tuition Organizations
    • $552 Single
    • $1,103 MFJ
    • You can only claim this credit if you’ve first donated for the Private School Tuition Organization Credit
    • The combined credits are $1,107 Single and $2,213 MFJ
    • Click here for a list of the certified School Tuition Organizations
  • Credit for Donations to the Military Family Relief Fund
    • $200 Single
    • $400 MFJ
    • Arizona only approves the first $1 million in donations as credits, so hurry!
    • You can find the form and more information on the MFRF website

Remember, you may not get both the Arizona state credit and the federal charitable deduction if you don’t act before Tuesday, August 28! We’ll keep you updated if this proposed rule changes.

Need help with your charitable contributions or other tax issues? Check out our tax consulting + compliance services.

Elizabeth Bolt