For those of you that are required to file Arizona Individual Income tax returns for 2011, there is still time to make charitable contributions that will qualify for credits on your 2011 Arizona Individual Income Tax Return. As a reminder, Arizona credits are a dollar for dollar reduction to your Arizona income tax liability while at the same time allow you a certain amount of discretion as to how a portion of your tax dollars are used. By taking advantage of the following credits, you could potentially direct up to $1,100 ($2,200 for a married couple filing a joint return) of your tax dollars to organizations and activities that you deem to be worthwhile. As with any charitable contribution, it is always a good practice to obtain a receipt from the charitable organization that you make a donation to and send into us along with the rest of your tax documents.
Credit for Contributions to Charitable Organizations that Provide Assistance to the Working Poor (Form 321)
A credit of up to $200 ($400 for a married couple filing a joint return), in lieu of a deduction, is allowed for cash contributions to a qualifying charity which now include those charitable organizations that provide services to the chronically ill or disabled children. You can check online at www.azdor.gov for a current list of qualifying charities. You must itemize deductions on your tax return to claim this credit.
Credit for Contributions Made or Fees Paid to a Public School (Form 322)
A credit of up to $200 ($400 for a married couple filing a joint return), in lieu of a deduction, is allowed for payment of fees to an Arizona public school or charter school that provides instruction in grades kindergarten through 12 for support of extracurricular activities. Extracurricular activities include but are not limited to academic field trips as well as athletic and fine arts activities. Senior Trip fees or other events that are primarily of a recreational, amusement or tourist nature do not qualify for the credit. Fees must be paid directly to the public school or school district.
Fees that you pay for your own child’s participation in an extracurricular activity will qualify for the Arizona credit however they may not qualify as a Federal charitable contribution.
Credit for Contributions to Private School Tuition Organizations (Form 323)
A credit of up to $500 ($1,000 for a married couple filing a joint return), in lieu of a deduction, is allowed for voluntary cash contributions made to a School Tuition Organization (STO). The contribution must be made directly to an STO. Contributions paid directly to a school, PTO or School District Foundation will not qualify as a contribution to an STO. It is important that you ensure that the STO meets the rules set out by the Arizona Department of Revenue to qualify as a school tuition organization prior to making a contribution. You can check online atwww.azdor.gov for a list of STO’s that are certified to receive contributions eligible for the credit. This contribution can be claimed as a credit on the 2011 Arizona Individual Income Tax Returns as long as the contribution has been made by April 17, 2012.
Contributions to an STO designated for the direct benefit of any of your dependents are not eligible for Arizona credit treatment. Contributions to an STO that are designated for the direct benefit of a relative however are eligible for Arizona credit treatment as long as the relative is not your dependent.
Credit for Donations to the Military Family Relief Fund (Form 340)
A credit of up to $200 ($400 for a married couple filing a joint return), in lieu of a deduction, is allowed for contributions made to the Military Family Relief Fund. Visit the website at www.azdvs.gov to download the donation form. Before you claim this credit, you must obtain a receipt from the Arizona Department of Veterans’ Services that indicates the contribution qualifies for the credit in 2011. Obtaining a receipt is important since total annual contributions eligible for this credit are capped at $1,000,000 per year.
Except for the Credit for Donations to the Military Family Relief Fund, unused credits will be carried forward for five succeeding years until used. Depending on your individual situation, you may also be able to deduct the contributions on your federal tax return.
If you would like additional information or would like to discuss any of these credits further and how they may affect your tax situation, please feel free to contact our office.