2021 Arizona Tax Credits

2021 Arizona Charitable Income Tax Credits



It is that time again, to update the information for a frequent question to our office: How much can I contribute for the Arizona tax credits? 

This post is intended to provide answers about the available credits and the limit amount.

Due to changes under the Tax Cuts and Jobs Act, in general, the ability to claim these donations as both an AZ tax credit and a charitable donation for Federal taxes was removed. Prior to 2018, these credits may have qualified as a charitable contribution for Federal tax purposes, in addition to the dollar for dollar tax credit against AZ taxes, during 2019 the IRS addressed this situation by allowing tax credits to be claimed as additional state income tax paid, up to the limit allowed for SALT (state and local taxes) deductions on Schedule A (that cap is $10,000 in total). The new rule allows for a partial application of the tax credits as an itemized deduction under the taxes paid section, if not already maxed out for tax deduction, that $10,000 amount.

These tax credits, for AZ purposes, are treated as if these amounts were paid as state income tax and allow for a dollar for dollar offset against the amount of AZ income tax liability.  These credits do not create refunds alone, but may result in a refund of AZ withholding or AZ estimated taxes paid that exceed the tax liability. 

These tax credits can still be utilized to direct dollars to organizations that you desire to support and many of these organizations survive through the donations.  Please consider supporting with your dollars the organizations that impact an area you care.

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) - More info/donate here: AZ MFRF
  • Contributions to Qualifying Charitable Organizations ($400/$800) formerly known as the Working Poor Credit - List of organizations here: 2021 Certified Charities
  • Contributions to Qualifying Foster Care Organizations ($500/$1,000) - List of organizations here: 2021 Certified Foster Care Charities
  • Contributions Made or Fees Paid to Public School ($200/$400) - AZ K-12 schools are eligible
  • Contributions to School Tuition Organization ($1,219/$2,435) - List of organizations here: School Tuition Organization List
The Arizona Military Family Relief Fund has a cap on donations allowed to be received each year of $1,000,000.  Due to this cap, timing of donation can be very important as any donations received after the cap is met will be returned to the donor and not qualify for the credit.  After donating for this, the donor will receive a special receipt indicating qualification as an AZ tax credit, that must be kept to support claiming on the AZ return.

Donations to Qualifying Charitable Organizations, Qualifying Foster Care Organizations, Public School Fees, and School Tuition Organization can be made during 2021 and up until April 15, 2022 to be claimed on the 2021 tax return.

The list of eligible organizations can be quite daunting due to the voluminous number of organizations.  There are many worthy organizations that are worthwhile to support, please check the current year approved charities that might be of interest.  If you need a recommendation, I (Matt) have served previously on the board of directors for Helping Hands for Single Moms (Visit Website) in years past and continue to support them to this day, they qualify under the Charitable Organizations category.

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 in your situation 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) and excess donations can be carried over to subsequent years.

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