As an Arizona taxpayer, you have a unique opportunity to direct your tax money to schools and charities you support and believe in.
You have to make a donation upfront, but — provided you stay within prescribed limits — you get every dollar back in the form of a tax credit.
If you make every possible donation, married couples filing jointly can give $4,813, and all other taxpayers can give $2,407 — and get it all back.
You can’t claim more than you owe in state taxes, but — with the exception of the Military Family Relief Fund Credit — unused credits can be carried forward for five years until used.
Here are some common questions about the process:
What has changed since last year?
On Aug. 23, 2018, the Internal Revenue Service issued a proposed regulation that will eliminate the deduction of these contributions on your federal income tax return.
The proposed regulations say that contributions resulting in a state or local tax credit in return for the contribution will not be deductible for federal tax purposes to the extent of the credit.
This proposed regulation applies to contributions made after Aug. 27, 2018. In spite of this change, the Arizona tax credits still reduce your Arizona state income tax, dollar for dollar, so that you can support these organizations without any direct costs to you.
The Arizona Department of Revenue has added a new reporting requirement for the qualifying charitable organization credits for 2018 tax returns.
A unique five-digit code has been assigned to each qualifying charitable organization and qualifying foster-care charitable organization. These codes must be included on your tax return for the credits to be accepted. For example, the Arizona Daily Star’s Sportsmen’s Fund code number is 20450.
You can find code numbers for qualifying charitable organizations at tucne.ws/12ko and for qualifying foster-care charitable organizations at tucne.ws/12kq
What kinds of tax credits can I get for donating to schools or charity?
You can claim a tax credit for donations made to K-12 Arizona public schools, including charter schools, and to School Tuition Organizations, which provide scholarships to private schools.
You can also get a tax break for making donations to a qualified charitable organization or foster-care organization, or to the Arizona Military Family Relief Fund, which provides financial assistance for active-duty service members, pre- and post- 9/11 veterans and their families.
Do I have to choose one category or can I give to all of them?
You can donate up to the maximum amount allowed in each category.
Can I make more than one donation within each category?
Yes, but you need to stay within the limit for each category to get your donation back as a dollar-for-dollar credit.
Can I get a credit for donations made that exceed how much I owe in taxes?
Sorry, but no. If your tax liability — the amount of taxes you owe for a given year — is less than your donation, the credit can be used only to reduce your liability to zero. You can’t get an additional refund. Unused tax credits, except for donations made to the military-family funds, can be applied to future tax years, but not beyond five consecutive years.
If I claim a tax credit, can I also write off the donation on my taxes?
Generally, donations claimed as a tax credit cannot also be used as an itemized deduction on your Arizona income tax return. You may be able to deduct the contributions made before Aug. 28, 2018, on your federal tax return, again depending on your situation. See a tax professional for help.
Once I make the donation, how do I get the credit?
If you donate to a public or private school or to a qualifying charity, you claim a credit on your state income tax return.
Use Form 322 for donations to public schools, Form 323 for donations to private schools, Form 348 for additional donations to School Tuition Organizations, Form 321 for donations to charitable organizations, Form 352 for donations to foster-care organizations and Form 340 for donations to the Arizona Military Relief Fund.
Again, new this tax year is that Arizona has assigned a code number to each qualifying charitable organization and qualifying foster-care charitable organization. Donors are required to enter this number on their tax returns to get the credit. You can find code numbers for qualifying charitable organizations on Page 8 and at tucne.ws/12ko and for qualifying foster-care charitable organizations on Page 11 and at tucne.ws/12kq
When is the deadline?
Donations to the Arizona Military Relief Fund must be paid before the annual cap of $1 million is reached, which was Aug. 27 in 2018. If you donate after the cap is reached, your donation will be returned.
For federal tax-deduction purposes, all donations are deductible only in the year paid. Contributions in all other categories must be paid on on before April 15, 2019 — those made between Jan. 1 and April 15, 2019, can be claimed on your 2018 or 2019 Arizona income tax return.
For more information, visit the Arizona Department of Revenue’s website at azdor.gov/tax-credits. The site has lists of qualifying charitable organizations for the 2018 tax year. Or call the department at 1-800-352-4090.