‘Tis The Season for Charitable Donations… & Tax Credits
’Tis the season for charitable contributions ― and tax credits
December is a time of giving. We give holiday gifts to our family and friends. We exchange trinkets with our co-workers. It also is a time when many of us choose to help others through charitable donations.
Without these end-of-the-year donations, many of the causes we love would cease to exist. Although we give from our heart, in Arizona we can assist others by donating to many of the charitable organizations we support and receive a dollar-for-dollar tax credit off our Arizona state taxes for those donations.
What is a tax credit?
A tax credit reduces the amount we pay the state of Arizona in taxes by the amount we donate. Because we get the donated funds back when we file our taxes, our net cost is zero, but these funds make an incredible difference to Arizona charities. A tax credit is significantly better that a tax deduction, which reduces your taxable income instead of your income tax owed.
So, for example, consider a taxpayer who has a tax liability of $2,000 and didn’t pay any taxes to the state during the year. If he makes a $500 contribution earmarked for a qualified organization, he will owe the state only $1,500 ― not $2,000.
Which organizations can receive funds?
Our state has two primary categories of tax credits for individuals. The Qualifying Charitable Organization tax credit allows you to donate state taxes to help a variety of organizations that provide assistance to low-income residents and foster care organizations in our state.
Not all charities are eligible to take these funds, but the list of qualified organizations is in the hundreds, so finding a group that matches your charitable desires is not difficult.
In addition to charitable organizations, Arizona also offers tax credits to help parents with kids in school with the cost of education. The public school tax credit is primarily used to assist parents with the cost of extracurricular activities. These funds aid with student expenses at both public and charter schools. The private school tax credit offers tuition assistance to families with children attending private schools. There are many special-needs private schools in our state that rely heavily on these tax-credit contributions to meet the needs of their student populations. You even can request a specific school or child to receive your funds.
A complete list of organizations and the amounts that can be taken as a credit can be found on the website www.aztaxcreditfunds.com. This site allows you to make your donations to your favorite charities online, with 100 percent of the contribution passed through to the charitable organization you choose.
So let’s support our local charities during this time of giving, but before you do, it makes sense to see if that donation qualifies for the state’s tax credit program.
(DISCLOSURE: A SCHOOL TUITION ORGANIZATION CANNOT AWARD, RESTRICT OR RESERVE SCHOLARSHIPS SOLELY ON THE BASIS OF A DONOR’S RECOMMENDATION. A TAXPAYER MAY NOT CLAIM A TAX CREDIT IF THE TAXPAYER AGREES TO SWAP DONATIONS WITH ANOTHER TAXPAYER TO BENEFIT EITHER TAXPAYER’S OWN DEPENDENT.)