It’s that time of year again! The end of the year is quickly approaching, and we encourage our clients, friends, and family to give to their favorite charities as a great tax-planning strategy. For many Arizona charities, your donation could equal a dollar-for-dollar Arizona tax credit, meaning it is of no additional cost to you to make these donations. But hurry! With the exception of the Public School and the School Tuition Organizations credits, all of these donations must be made by December 31, 2015.

 These tax credits are available to individuals who make charitable contributions to certain organizations and schools. Each of these tax credits provides a dollar-for-dollar reduction of your Arizona tax liability (up to your tax liability, subject to the below thresholds). These tax credits effectively redistribute your Arizona taxes from the Arizona Department of Revenue to the charities of your choice.

 Because they are credits, taxpayers do not need to itemize their deductions to get a benefit from these contributions on their Arizona tax returns, unlike charitable contributions on the federal tax return.

 If you have questions on how these tax credits can be utilized to their maximum potential, please reach out to your tax professional to discuss.

Contributions to Qualifying Charitable Organizations (previously called the Working Poor tax credit)

Not every donation to a nonprofit organization qualifies for this tax credit. In order to be considered a Qualifying Charitable Organization (QCO), an organization must spend at least fifty percent of its budget to help Arizona residents that receive Temporary Assistance of Needy Families (TANF) benefits, are low income residents, or are chronically ill or physically disabled children.

The maximum amount of the credit for 2015 is $200 ($400 if married filing joint).

The Arizona Department of Revenue publishes a list of all QCOs each year. A list of Qualifying Charitable Organizations for 2015 can be found here.

Contributions to Qualifying Foster Care Charitable Organizations

An additional credit, over and above the QCO credit described above, is available for contributions made to Qualifying Foster Care Charitable Organizations (QFCO). In addition to meeting the requirements to be a QCO, a QFCO must spend at least fifty percent of its budget on services to foster children in Arizona. Please note, you do not have to make the qualified charitable organization tax credit donation in order to make the qualifying foster care charitable organization tax credit.

The additional available credit amount for 2015 is $200 ($400 if married filing joint).

A list of Qualifying Foster Care Charitable Organizations for 2015 can be found here.

Contributions to Public Schools

Arizona provides a credit for fees paid or contributions made to a public school.  For purposes of this credit, charter schools are considered public schools. Note, this credit allows taxpayers to make donations in the following year (until April 15th, 2016) where the credit can be applied to the 2015 Arizona tax. Though potentially qualifying for an Arizona credit in 2015, any amounts donated in 2016 to a public school are deductible for Federal purposes in the year made (2016).

The maximum amount of the credit is $200 ($400 if married filing joint).

The Arizona Department of Education keeps a listing of all public and charter schools in Arizona. You can search for a school in your area here.

Contributions to School Tuition Organizations

In addition to public schools, Arizona also provides a credit for contributions made to a School Tuition Organization (STO).  An STO is an organization that provides scholarships to individuals attending a private school. Note, this credit allows taxpayers to make donations in the following year (until April 15th, 2016) where the credit can be applied to the 2015 Arizona tax. Though potentially qualifying for an Arizona credit in 2015, any amounts donated in 2016 to a school tuition organization are deductible for Federal purposes in the year made (2016).

The maximum amount of this credit in indexed for inflation. For 2015, the limit is $1,067 ($2,134 if married filing joint). Note, this credit’s reporting is split onto two separate Arizona Tax Credit forms (Forms 323 and 348).

A current list of School Tuition Organizations can be found here.

Contributions to the Arizona Military Family Relief Fund**

The Arizona Military Relief Fund provides financial assistance to families of currently deployed and veteran military service members. Arizona provides a tax credit for contributions to this fund, but the credit is capped at $1,000,000 across all taxpayers per year – once the fund has reached this cap, taxpayers may donate but will not be eligible to take the credit. As a result, we recommend making your donation early in the year if you choose to take advantage of this credit (it typically caps out at the end of November). If you send your check in and the annual cap has been reached, your donation check will be returned to you uncashed. Because of this, you need to provide a receipt from Veteran’s Services in order to take the credit.

The maximum amount of the credit for 2015 is $200 ($400 if married filing joint).

More information about the Arizona Military Relief Fund can be found here, including the most up-to-date amount of donations contributed towards the $1M cap.

The donation form to make a contribution to the Arizona Military Relief Fund can be found here.

**As of Monday December 1, 2015, the $1M cap has been reached. So this credit is no longer available for individuals to claim.

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