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Cheryl Dickerson, CPA

Over the years I have had numerous clients express to me that they didn’t mind paying the tax but they just wished they had the ability to control where the funds were spent. Arizona tax credits give taxpayers the ability to have a say as to how their tax dollars will be spent. As a tax credit, your tax liability is reduced dollar for dollar. For example, if your tax liability was $1,000 and you had availed yourself of $1,000 in tax credits your resulting tax liability would be zero. In this article, I will focus on tax credits that are available to individuals, but it should be noted tax credits exist also for business entities.

If you were to look at Arizona Form 301 you would see that there are listed 28 nonrefundable individual tax credits that are available. I’m pretty sure if I were to write about all 28, I’d lose your interest somewhere around number 6 and due to its length, my article would never be published. I’ll instead focus on the individual Arizona tax credits that are generally seen the most on individual tax returns.

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Credit for Contributions Made or Fees Paid to Public Schools

The credit for making contributions or paying fees to a public school for support of qualified activities or qualified programs is available only to individuals. Qualified activities and qualified programs include extracurricular activities; character education programs and standardized testing fees for college credit or readiness offered by a widely recognized and accepted educational testing organization. Fees paid for your own child to participate in qualified activities or qualified programs qualify for the credit. You don’t, however, need to have a child in school in order to claim the credit. Public schools and charter schools that provide instruction in grades kindergarten through 12 are eligible for the credit. The maximum amount of credit is equal to the amount contributed or the amount of fees paid. The credit cannot exceed $ 200 for single taxpayers; heads of household and married filing separate and $400 for married taxpayers that file a joint return.

Individual Private School Tuition Credits

There are two private school tuition tax credits that are available to individual taxpayers. Taxpayers who donate the maximum amount allowed on the Credit for Contributions to Private School Tuition Organizations may make an additional donation and claim the additional credit sometimes referred to as the Switcher credit.

To qualify for the credit an individual must make cash or payroll withholding contributions to a tuition organization that provides scholarships or grants to qualified schools. A school tuition organization is an organization that is exempt under Section 501(c)(3) of the Internal Revenue Codes; allocates at least 90 percent of its annual contributions to scholarships or grants and makes its scholarships/grants available to students of more than one qualified school.  The Arizona Department of Revenue is required to certify school tuition organizations and a list of currently enrolled school tuition organizations is maintained on the AZDOR website.

A contribution will not qualify for the credit if you designate the donation for the direct benefit of your dependent; designate a student beneficiary as a condition of your contribution to the organization or if you agree with another person to designate each other’s contribution to the tuition organization for the direct benefit of each other’s dependent. This practice is commonly known as “swapping” does not result in a contribution eligible for the tax credit.

In 2019 the maximum credit allowed for single; head of household and married filing separate taxpayers for the original credit is $569 and for married filing a joint return $1,138. The additional credit (switcher) maximum is $566 for a single; head of household taxpayer and married filing separate and $1,131 for married filing joint. The maximum credit for taxpayers contributing to both the original and switcher credit is $1,135 for single; head of household and married filing separate and $ 2,269 for married taxpayers filing a joint return.

Qualifying Charitable Organizations and Qualified Foster Care Charitable Organizations

There are two separate credits for individuals who contribute to qualifying charitable organizations and qualifying foster care charitable organizations. Both organizations provide immediate basic needs to residents of Arizona who:

  • Receive temporary assistance for needy family benefits,
  • Are low-income residents of Arizona,
  • Or are children who have a chronic illness or physical disability.

A qualifying foster care charitable organization also provides immediate basic needs to at least 200 qualifying individuals in the foster care system. The Arizona Department of Revenue provides a list of organizations that meet the criteria as a qualifying charitable organization or qualified foster care charitable organization on its website.

The maximum credit for contributions to a qualifying charitable organization in 2019 for single; head of household and married filing separate taxpayers is $400 and $800 for married filing jointly.

Single; head of household and married filing separate taxpayers are allowed a maximum credit of $500 for contributions to a qualified foster care charitable organization. Married taxpayers filing a joint return are allowed a maximum credit of $1,000 in 2019.

Arizona Military Relief Fund

The Arizona Military Family Relief Fund provides financial assistance to the families of currently deployed service members and post 9/11 military and veteran families for hardships caused by the service member’s deployment to a combat zone. An advisory committee determines assistance and is comprised of twelve members appointed by the Governor. The Arizona Military Family Relief Fund was established in 2007 by the Arizona legislature. The charity fund does have a $1,000,000 cap so any contributors should contribute early in the year to obtain the credit. At this writing, the fund had reached its limit for online donations and had a limited window for mailed-in check donations.

The credit maximum is $200 for single/head of household and married filing separate and $400 for married filing jointly.

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Amongst the additional credits that are available to individuals are credited for solar energy devices, taxes paid to other states or countries increased research activities and new employment. If you are interested in any of the additional credits that exist be sure and contact your Henry+Horne tax professional.

The tax credits are nonrefundable.  If your credits exceed your tax liability you may with the exception of the credit for donations to the military family relief fund carry the unused portion of the tax credit forward for five succeeding taxable years. There is no carryover for the credit for donations to the military family relief fund.  You may not take a charitable deduction as part of your itemized deductions for the amount of the credit. If, however, your itemized deduction for taxes falls below the $10,000 limit you may deduct the credit amount as an additional tax. Contributions can be made as late as April 15th of the following year and be designated as a tax credit on the prior year’s tax return.

The Tax Cuts and Jobs Act brought about a massive change to the standard deduction and changed many individual’s strategies about charitable giving. No longer able to itemize their deductions many individuals decreased their charitable giving. Giving USA which provides comprehensive data on charitable giving reported that individual giving declined in 2018 by 292.09 billion. The needs that these organizations try to fill have not declined, however. Arizona tax credits are an excellent way to help provide these organizations with the funding they so desperately need to fulfill their mission while giving you the ability to control your tax dollars. Arizona tax credits really do give you credit for giving!

Cheryl L. Dickerson, CPA, specializes in the preparation, review, planning and research for both individual and business tax returns. She can be reached at (480) 483-1170 or