As the tax filing deadline approaches, many people have started to look at how they could be planning differently to reduce their tax bill.
Taxes are rarely at the top of anyone’s mind throughout the year; however, the looming shadow of inflation has the potential to make them even more stressful than usual. While there’s no way out of taxes (at least, none that we’ve discovered yet), there is a way for Arizona residents to significantly reduce their state tax liability—and in doing so, support a good cause—via the Arizona Charitable Tax Credit. Here, we’ll go over the basics of how the tax credit works, which types of donations are included, and how you can use it to your advantage.
What Is the Arizona Charitable Tax Credit?
The Arizona Charitable Tax Credit program allows taxpayers to receive dollar-for-dollar state income tax credit for donations made to approved organizations, including Qualifying Charitable Organizations (QCOs) and Qualifying Foster Care Charitable Organizations (QFCOs).
How Is the Arizona Charitable Tax Credit Different From Normal Tax Deductible Donations?
Typically, when calculating taxes, charitable donations are deducted from an individual’s adjusted gross income (AGI), and the individual then pays taxes on the remaining AGI. In this case, the individual’s full tax payment still goes to the government.
Under the Arizona Charitable Tax Credit, the deduction for qualifying donations is applied directly to the individual’s state income tax burden. For example, an individual who owes $1,000 in state income taxes but makes a $300 qualifying donation would then only owe $700 in state taxes. Although the individual still ends up paying the same amount, they have more control over where their money goes.
Are There Limits to the Arizona Charitable Tax Credit?
Yes—the limit for the maximum amount of tax credit you can claim varies depending on whether you donate to a QCO or QFCO, and how you are filing your tax return. But there’s good news – the maximum contributions for state and federal tax credits increased in 2023. Here is an outline on the new limits:
- Filing singly: the limit is $421 for contributions to QCOs / $526 for QFCOs
- Married, filing jointly: the limit is $841 for QCOs / $1,051 for QFCOs
- Heads of household: the limit is $421 for contributions to QCOs / $526 for QFCOs
- Married, filing separately: the limit is $421 for contributions to QCOs / $526 for QFCOs
It’s important to note that donations to QCOs and QFCOs are treated as separate tax credits, meaning that an individual could take advantage of both in the same year if they wanted to. If an individual filing singly made the maximum creditable donation to both a QCO ($421) and a QFCO ($526) their total tax credit amount would be $947.
Fortunately, the Arizona Charitable Tax Credit has no minimum, meaning that taxpayers can donate as much or as little as they want and still receive commensurate tax credit.
How Do I Claim My Tax Credit?
In order to claim your tax credit, you must file Form 321 for contributions to QCOs and Form 352
Consider Donating to FSL, a Qualifying Charitable Organization
We know that you have a lot of choices when it comes to making charitable contributions. This year, we’re asking that you consider FSL when making your year-end donations.
About FSL
Established in 1974, FSL is dedicated to providing integrated, customized care for those who need it in the Phoenix area. We offer a wide range of home- and community-based services, including:
- Affordable housing options
- Nutritious meal programs
- Health & Wellness programs
- Senior centers
- Recreation programs
- Support for caregivers
These services are designed to enable Arizonans of all ages to live happier, healthier, more independent lives. So, if you or someone you know is struggling to have their needs met, don’t hesitate to contact us and find out how we can help you. And if you’re looking to give back, consider donating or volunteering your time to our mission. We can’t wait to work with you!
