Wednesday, September 21, 2016

Common Arizona Tax Credits Update for 2016

Arizona Tax Credits for 2016


This week I had a client ask if I had updated the list of Arizona Tax Credits for 2016.  She had checked the blog that I post and didn't see the full listing so gave me a great reminder to sit down and list out the available credits.

There are many credits available to Arizona taxpayers, this blog will focus on the donation related credits and not as much on the multitude of miscellaneous credits for things such as solar energy/lighting, research and development, etc.

The credits I want to highlight are: 1) Public School Fees paid or donation, 2) School Tuition Organizations, 3) Charitable Organizations, 4) Qualifying Foster Care Organization, and 5) Arizona Military Family Relief Fund.  These credits are allowed to be used together but are limited in the separate category by donation amounts.  These credits can be used up to your tax liability to the state of Arizona and some of the credits allow excess amounts to be carried over up to 5 years.

1 - Public School Tax Credit

The amount that is eligible is $200 for single taxpayers (or head of household), $400 for married filing joint taxpayers.  The payment must be in cash/check/credit card and can not be done by in-kind donations (purchased items donated to the school).  The payment also must be to an Arizona K-12 school (public or charter school) and is able to be made up to April 15th following the year it is to be claimed as a credit.

It does not have to be just a donation, the payment may be for fees paid to the school.  According to the Arizona School Tax Credit Publication 707:
"What are qualified activities or qualified programs for the purpose of the public school credit? 

For the purpose of the public school credit, qualified activities and qualified programs include any of the following: 
Extracurricular activities 
Character education programs
Standardized testing fees for college credit or readiness offered by a widely recognized and accepted educational testing organization
Preparation courses and materials for standardized testing
The career and technical education industry education industry certification assessment "
Extracurricular activities include athletics, band, choir and other similar participation fees.  It may also include field trip or class trip amounts, if paid to the school.  The standardized testing fees and costs must be paid to the school to be eligible.

2 - Private School Tuition Organizations

This credit is for organizations that provide scholarships to private school students, in grades K-12.

This credit is adjusted for inflation each year and technically is comprised of 2 components.  The 2016 credit amounts that can be contributed are up to $1,087 for single taxpayers, $2,173 for married filing joint.  The AZ Department of Revenue provides a listing of the eligible organizations, here is a link to that document: STO List - AZ DOR.

3 - Charitable Tax Credit

This credit was previously known as the Working Poor Tax credit.  This credit is available for donations made to qualifying charitable organizations.  The contribution amounts have significantly increased for 2016, $400 for single taxpayers and $800 for married taxpayers (this is double the amount previously allowed for this credit).

The AZ Department of Revenue provides a listing of the eligible organizations, here is a link to that document: Charitable Organizations

4 - Qualifying Foster Care Organization Credit

This credit is the newest credit that was implemented in just the last couple of years.  There was a major change to this credit for 2016 - the allowed amounts increased to $500 for single taxpayers and $1,000 for married taxpayers plus this credit used to be combined/connected with the Charitable Tax Credit but for 2016 it will be a stand alone credit not dependent on the other credit.

The AZ Department of Revenue provides a listing of the eligible organizations, here is a link to that document: Qualifying Foster Care Organizations

5 - Arizona Military Family Relief Fund Credit

This credit provides grants and assistance to military family and members that are struggling financially.  The credit has a cap on the total donations that it can receive, once $1,000,000 has been received the funds have to be returned by law.  So make sure you make your contribution early enough to have it qualify.  The amount that can be contributed is $200 for single taxpayers and $400 for married taxpayers.

There is a form to submit with your check that can be obtained here: MFRF 2016 Donation Form

Summary
In summary, you can do all of the above credits up to the amount for your tax filing status or a combination of any of the credits. The above listed credits are available to offset Arizona tax liability up to the amount of the tax liability but these credits will not by themselves create a refund. The credits combined with withholding or estimated tax payments may result in a refund of the overpayment of the withholding or estimated taxes.  

If you are unsure if these would benefit you specifically, I recommend that you contact a tax professional that can answer that question for you.  Our office uses these credits as part of year-end tax planning for clients.  If you want to support specific, qualified organizations then utilize these credits to direct your tax dollars.

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