AZ Tax Credits updated for 2018 Limits
Our office often answers the questions: what tax credits are available for Arizona taxpayers? How much can I contribute for the Arizona tax credits? This post is intended to provide answers about the available credits.
This year there are changes to the available credits and the applicability of "double dipping". Prior to 2018, these credits qualified as a charitable contribution for Federal tax purposes, in addition to the dollar for dollar tax credit against AZ taxes. A tax credit is a great tax savings because of that dollar for dollar application, but only if you have income subject to tax in the state of AZ. The IRS released proposed rules that changed the charitable donation eligibility of these types of contributions due to the Tax Cuts and Job Act limits on SALT (State and Local Taxes) deductions. The IRS has proposed rules that state if a taxpayer receives a benefit (in this case a state tax credit) for a contribution, the contribution must be reduced for the benefit received (unless a de minimis exception applies). This rule went into effect for donations after August 27, 2018.
These tax credits can still be utilized to direct dollars to organizations that you desire to support, but the extra credit of a charitable donation is no longer applicable going forward.
This year there are changes to the available credits and the applicability of "double dipping". Prior to 2018, these credits qualified as a charitable contribution for Federal tax purposes, in addition to the dollar for dollar tax credit against AZ taxes. A tax credit is a great tax savings because of that dollar for dollar application, but only if you have income subject to tax in the state of AZ. The IRS released proposed rules that changed the charitable donation eligibility of these types of contributions due to the Tax Cuts and Job Act limits on SALT (State and Local Taxes) deductions. The IRS has proposed rules that state if a taxpayer receives a benefit (in this case a state tax credit) for a contribution, the contribution must be reduced for the benefit received (unless a de minimis exception applies). This rule went into effect for donations after August 27, 2018.
These tax credits can still be utilized to direct dollars to organizations that you desire to support, but the extra credit of a charitable donation is no longer applicable going forward.
The tax credits that are most utilized are listed below (Credit Title and maximum donation amount for single/married taxpayers):
- Arizona Military Family Relief Fund ($200/$400) - MAXED OUT IN 2018
- Contributions to Qualifying Charitable Organizations ($400/$800) formerly known as the Working Poor Credit - List of organizations here: 2018 Certified Charities
- Contributions to Qualifying Foster Care Organizations ($500/$1,000) - List of organizations here: 2018 Certified Foster Care Charities
- Contributions Made or Fees Paid to Public School ($200/$400)
- Contributions to School Tuition Organization ($1,107/$2,213) - List of organizations here: School Tuition Organization List
The Arizona Military Family Relief Fund has a cap on donations allowed each year of $1,000,000. Due to the IRS proposed rules, this credit has already received the allowed donations for 2018. Any donations sent to them will be returned to the donor.
Donations to Qualifying Charitable Organizations, Qualifying Foster Care Organizations, Public School Fees, and School Tuition Organization can be made during 2018 and up until April 15, 2019 to be claimed on the 2018 tax return.
The AZ Department of Revenue provides lists (in the links above) to the organizations that qualify for Charitable Organizations, Foster Care Organizations, and School Tuition Organizations. The Public School eligible schools are K-12th grade AZ schools and schools can be searched at the AZ Department of Education here.
The AZ Department of Revenue provides lists (in the links above) to the organizations that qualify for Charitable Organizations, Foster Care Organizations, and School Tuition Organizations. The Public School eligible schools are K-12th grade AZ schools and schools can be searched at the AZ Department of Education here.
Please consult with a tax advisor (or our office) to see if these tax credits would be beneficial to you and be careful not to do too much in tax credits as these are not refundable (the refund generated from these credits is because of tax withholding or estimated tax payments that are offset by these credit payments).
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