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Q&A: How Arizona tax credits work

  • Updated

As an Arizona taxpayer, you have a unique opportunity to direct your tax money to schools and charities you support and believe in.

You must make a donation upfront, but — provided you stay within prescribed limits — you get every dollar back in the form of a tax credit.

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.

The Arizona Legislature has retained and expanded some of the incentives for charitable giving for 2021.

The dollar limits differ depending on marital status.

Your payments will make a positive impact on the recipient organization, while at the same time reducing your Arizona income tax liability dollar for dollar.

These credits give you the opportunity to direct your tax dollars to the schools and charities of your choice at no cost.

The state credits totaling $5,035 for “married filing joint” and $2,519 for all other filers can be claimed at one time for contributions made individually.

Here are some common questions about the process:

Q. What kinds of tax credits can I get for donating to schools or charity?

A. You can claim a tax credit for certain donations made to K-12 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.

Q. Do I have to choose one category or can I give to all of them?

A. You can donate up to the maximum amount allowed in each category.

Q. Can I make more than one donation within each category?

A. Yes, but you need to stay within the limit for each category to get your donation back as a dollar-for-dollar credit.

Q. Can I get a credit for donations made that exceed how much I owe in taxes?

A. 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 Relief Fund, can be applied to future tax years, but not beyond five consecutive years.

Q. If I claim a tax credit, can I also write off the donation on my taxes?

A. Generally, donations claimed as a tax credit cannot also be used as an itemized deduction on your Arizona income tax return or for federal income taxes.

Q. Once I donate, how do I get the credit?

A. If you donate to a public or private school or to a qualifying charity, you claim a credit on your Arizona 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.

Form 340 for donations to the Arizona Military Relief Fund.

Q. When is the deadline?

A. Donations to the Arizona Military Family Relief Fund must be paid before the annual cap of $1 million is reached, which in 2021 was Dec. 8.

Now would be the time to mark your calendar to make a donation for tax year 2022.

Contributions in all other categories must be paid on or before April 15, 2022.

Those made between Jan. 1 and April 15, 2022, can be claimed as a credit on your 2021 or 2022 Arizona income tax return.

Q. What is a qualifying charitable organization?

A. A credit of up to $800 for married filing jointly and up to $400 for all other filers is available for cash contributions to a qualifying charitable organization.

These organizations include those that provide services to families and individuals who have a chronic illness or physical disability.

A unique five-digit code has been assigned to each qualifying charitable organization.

This code must be included on your tax return for the credit to be accepted. For example, the Arizona Daily Star Sportsmen's Fund Send A Kid to Camp's code is 20450.

Taxpayers do not have to itemize deductions to claim a credit for contributions to charities that provide assistance to the working poor.

Many well-known organizations assist the working poor and qualify for this deduction.

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