Tax Credit Details
What is a Tax Credit?
A tax credit money that taxpayers can subtract, dollar for dollar, from the income taxes they owe. They’re much more favorable than tax deductions because they reduce the tax due, not just the amount of taxable income. Essentially, a tax credit is an opportunity to take money you would’ve given to the government, and give it to a charitable cause instead. And it costs $0 to take advantage!
AZ Tax Credits & Charities
Arizona provides two separate tax credits for individuals who make contributions to charitable organizations: one for donations to Qualifying Charitable Organizations (QCOs) and the second for donations to Qualifying Foster Care Charitable Organizations (QFCOs). Individuals making donations to these charities may claim these tax credits on their Arizona Personal Income Tax returns.
QCOs provide immediate basic needs to residents of Arizona who receive temporary assistance for needy families (TANF) benefits, are low income residents of Arizona, or are individuals who have a chronic illness or physical disability. The tax credit is claimed on Form 321. The maximum credit donation amount for 2024 is $938 married filing joint, and $470 for all others.
QFCOs provide immediate basic needs to residents of Arizona who receive temporary assistance for needy families (TANF) benefits, are low income residents of Arizona, or are individuals who have a chronic illness or physical disability, and provide immediate basic needs to at least 200 qualifying individuals in the foster care system. The tax credit is claimed on Form 352. The maximum QFCO credit donation amount for 2024 is $1,173 married filing joint, and $587 for all others.
Taxpayers can donate to both QCOs & QFCOs each year, so the combined donation limit for 2024 is $2,111 married filing joint, and $1,057 for all others.
Other Details & Examples
As noted above, combined donation limit for 2024 is $2,111 married filing joint and $1,057 for all other filers. However, your donation limit is less if your tax liability for the year is lower than those amounts.
Example for a single tax filer… the total tax you owe to the State for the year is $650. Although the donation limit is $1,057, you can only donate up to $650.
But in that example, what if you donated $800 back in June because that’s how much state tax you owed for the prior year, but then you ended up owing just $650 in the current year? Okay, you’ve "over-donated” by $150 for the current year, but it’s not lost! You have the next 5 years to use that $150 overpayment… so just apply it to reduce your tax bill next year.
DISCLAIMER: This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. No warranty or representation, express or implied, is made by Charity Fundraising of Arizona, nor does Charity Fundraising of Arizona accept any liability with respect to the information provided on this website. You should consult with your professional advisor(s) prior to acting on the information on this site.
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