Giving Thanks (and Taking Credits!)

Arizona Tax Planning & Tax Credits

Ways to Reduce Your Tax Liability for 2024

Year End Tax Planning for Individuals and Businesses

As the end of the year approaches, it is a good time to think of planning moves that will help lower your tax bill for this year and possibly the next. Year-end planning for 2024 takes place against the backdrop of ongoing and significant changes in the rules for individuals and businesses. 

Tax Credits Are More Beneficial Than Deductions
The State of Arizona offers generous tax credits for those who contribute to certain types of charities. Note that these are tax credits, which are more beneficial than tax deductions because they reduce your Arizona state tax liability dollar-for-dollar.

For example, if you owe $400 in Arizona income tax, and you claim an Arizona tax credit for $400, your Arizona tax liability will be zero. In essence, you have just reduced your tax liability while giving your tax dollars to the charity of your choice.

If your tax was less than the amount donated (up to the limitation because each type of credit has its own limitation on how much is eligible for the credit – see details below) you may be allowed to carry over the excess to future years. Each type of credit has its own carryover rules.

Please find a listing and description of the types of charitable donations that qualify for Arizona tax credits, as well as links to the listings of what organizations qualify for each. 

Donations Made to Charitable Organizations

The State of Arizona offers a tax credit for cash contributions made to qualifying charitable organizations; this credit was formerly known as the Working Poor Tax Credit. The provision allows those who qualify to take a dollar-for-dollar tax credit, up to $470 for Single taxpayers, $938 for Married Filing Joint taxpayers.

A Qualifying Charitable Organization is a charity that is a 501(c)(3) or a community action agency that received community services block-grant program monies. These organizations must spend at least 50% of their budget on services to Arizona residents who either:

• Receive Temporary Assistance for Needy Families (TANF) benefits,
• Are low-income residents whose household income is less than 150% of the federal poverty level, or
• Are children who have chronic illness or physical disability.

These organizations must also show plans to continue spending at least 50% of its budget on services to those described above.

Click here to see a list of Charitable Organizations.

Foster Care Charitable Organizations

A credit in the amount of $587 is available to Single taxpayers and $1,173 to Married Filing Jointly taxpayers for 2024.

A Qualifying Foster Care Charitable Organization is a charity which meets the requirements for a Qualifying Charitable Organization in addition to:

• Providing ongoing services to at least 200 qualified individuals in the foster care system.
• Spending at least 50% of its budget on ongoing services to qualified individuals in the foster care system.

Click here to see a list of Foster Care Charitable Organizations.

Public Schools – After School Activities

The Arizona tax law allows individual taxpayers a credit for contributions made, or fees paid to, a public or charter school for support of extracurricular activities or charter education programs. The credit is equal to the amount contributed or the amount of fees paid with a maximum of $200 for Single taxpayers and $400 for Married Filing Joint taxpayers.

The donations you make can only be used for extracurricular activities, such as sports programs, field trips, after school tutoring programs, or fine arts. These are school-sponsored activities that require enrolled students to pay a fee in order to participate. Note that the contribution must be made to the school’s central fund to support these activities – it cannot be made to an organization such as the PTA, school foundation or school club. You can specify which programs you would like your contribution to support when donating.

Click here for a list of Public Schools.

Private School Tuition Tax Credits

Credit for Contributions to Private/Certified School Tuition Organizations. The credit is equal to the amount contributed or the amount of fees paid with a maximum of $2,910 for Married Filing Joint taxpayers or $1,459 for Single taxpayers.

These organizations provide scholarships for students attending private schools. Donations are typically split between two credits, the Private School Tuition Credit ($1,459 Married Filing Joint taxpayers or $731 Single taxpayers) and the Certified School Tuition Credit ($1,451 Married Filing Joint taxpayers or $728 Single taxpayers), but you can make the full donation for both credits at once for the total and we’ll do the split on your tax return.

There are many tuition organizations that will qualify for this credit but the most commonly used organizations are the Catholic Tuition Support Organization (CTSO), the Institute for Better Education (IBE)  and the Jewish Education Tax Credit Organization (JETCO) (most organizations will allow you to specify a school to receive the donation).

Please note that donations made directly to a school, or for the benefit of a dependent, do not qualify for the credit.

The full listing of all qualifying School Tuition Organizations can be found here.*

* Donations to any of these organizations can be made through April 15th of the year following the applicable tax year (the only exception is the Arizona Military Family Relief Fund).

Arizona Military Family Relief Fund

This individual income tax credit is available for contributions to the Arizona Military Relief Fund, which was established by the Arizona Legislature in 2007 and is administered by the Arizona Department of Veterans’ Services (ADVS). The 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.

Donations made to the Arizona Military Family Relief Fund can qualify for a tax credit in the amount contributed up to $200 for a Single taxpayer or $400 for Married Filing Joint taxpayers. However, once the total donations for the calendar year reach one million dollars, no additional donations will qualify for the credit. The determination of whether a donation will qualify for the credit is made on a first come, first served basis. The ADVS will provide you with a receipt that will let you know if your donation qualifies for the credit. The ADVS will also send a copy of that receipt to the Arizona Department of Revenue.
 
Click here to donate to Arizona Military Family Relief Fund.