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How to Use 2024 Arizona Tax Credits

Dana Anspach

April 20, 2024

The Arizona State Tax Credit program allows you to make a donation to an eligible organization and receive a dollar-for-dollar credit against Arizona state taxes owed.

Donating to tax credit-eligible organizations will most likely leave you in a tax-neutral situation – meaning you’ll pay about the same amount whether you use the tax credits or pay the tax. But by donating, you get a say in how the money is spent by choosing which tax credit-eligible organizations you contribute to.

You can contribute up to the amount of your expected Arizona tax liability. If you contribute more than your total state tax amount, the credits can be carried forward for five years, so do not worry if you end up with more credits than taxes. In general, you must make your tax credit donations by April 15, 2025, for them to apply to the 2024 year. You can find additional information on the Arizona Dept of Revenue state tax credit page.

How Do I Make a Tax Credit Donation?

Most organizations provide a form or instructions on their website on how to donate. Today, most allow you to donate online with a credit card. Others require you to print and mail a form with a check. Most organizations will mail you a receipt or letter that verifies your donation amount.

Below you’ll find links to information and donation pages for six different AZ eligible tax credit options. 2024 limits are quoted.

1. Arizona Credit for Donations Made to Qualifying Charitable Organizations (QCO)

Contribution amounts eligible for credit: $938 for married filing joint/ $470 for all others.

The Arizona Department of Revenue provides a list of qualifying charitable organizations. As the founder of a firm that focuses on issues around retirement and aging, Dana, Sensible Money’s Founder & CEO, makes her charitable donation to the Area Agency on Aging in Phoenix each year. Her rationale is that while Sensible Money helps people who have accumulated a nice nest egg for retirement, the Area Agency on Aging serves the other end of the spectrum and helps retirees who have few resources. This credit is claimed using Form 321.

2. Qualified Foster Care Charitable Organization (QFCO)

Contribution amounts eligible for credit: $1,173 for married filing joint/ $587 for all others.

The Arizona Department of Revenue provides an updated list of qualifying foster care organizations that are eligible for this credit at the same linked page for the QCO credit above. This credit is claimed on Form 352.

3. Public School Credit

Contribution amounts eligible for credit: $400 for married filing joint / $200 for all others.

You can find additional information about this program from the AZ Dept of Revenue School Tax Credit page. The Arizona Department of Education also provides a list of links to all AZ schools. If you know what school you would like to donate to, find the school’s website, as it will likely provide you with information and a form to use to make a donation. This type of credit is claimed using Form 322.

4. Private School Credit

Contribution amounts eligible for credit: $1,459 limit for married filing joint / $731 limit for all others.

You can find additional information about this program from the Arizona Department of Revenue (AZDOR). AZDOR also has a list of tuition organizations certified to receive donations for this credit. This credit is claimed on Form 323.

If you are an owner of an S Corporation, ask your tax preparer about the credit for business contributions, which is claimed on Form 335-I.

Discuss these options with your tax preparer to see which you are eligible for.

5. Additional “PLUS” Private School Credit

Contribution amounts eligible for this additional credit: $1,301 for married filing joint / $652 for all others.

In 2012, Arizona Signed the Overflow/PLUS tax credit law, called the Switcher Individual Income Tax Credit. This law allows donors to receive credit for contributions over and above the original private school tax credit that can be claimed on Form 323. This additional credit is claimed on Form 348.

6. The Arizona Military Family Relief Fund Credit

Contribution amounts eligible for credit: $400 for married filing joint / $200 for all others.

Contribute by going to the Arizona Military Family Relief Fund website. You can donate online, however this fund can only accept a total of $1 million in donations, so once that limit is reached, any more donations received are considered charitable donations, not tax credit donations. The donation amount is often reached before year-end; so contribute early if you want the credit for this one.

Keeping Records

After you contribute, don’t forget to print and save the confirmation page to provide to your tax preparer and/or keep for your tax records.

How Tax Credits Work

Assume you are a married tax filer and usually pay about $4,000 in Arizona state taxes. This year, you decide to contribute to organizations eligible for the tax credit.

Let’s assume you write checks (or donate online) to four organizations that qualify for four different tax credits (the QCO Credit for $938, the QFCO for $1173, and the Public School Tax Credit for $400 and the Private School Credit for $1,459) for a total of $3,970.

You get a dollar-for-dollar credit against state taxes owed for $3,970. By donating to tax credit eligible organizations, now your total state tax liability equals $4,000 less the credits, for $30 of remaining tax liability. Your total dollars paid remains $4,000 whether you use tax credits or not – it’s either $4,000 all paid to the state, or $3,970 paid to tax credit eligible organizations and $30 paid to the state. If you had already paid in the full $4,000 in state taxes during the year, you would get a refund for the $3,970.

Note. In the past, if you itemized deductions, you could also take a charitable deduction for some of these contributions. However, IRS rule changes no longer allow this deduction if you received a corresponding state-level tax credit.

Your tax professional can answer additional questions about tax credits and the forms you need to file with your tax return to receive them.

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