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Five Types of Arizona Tax Credits and Why They Are Important

by | Jan 9, 2022 | Blog

Arizona tax credit

Did you know that you can use your tax dollars to support an organization or a community in Arizona? The state offers its taxpayers this unique opportunity, the Arizona Tax Credit. This excellent tax opportunity permits a registered tax-paying resident to select where a part of their state income taxes will be allocated. Arizona is offering them a choice. They can choose to use their tax benefits for donation to a qualified charitable organization. In return, the donor will get a dollar-for-dollar tax credit receipt to be used when filing taxes.

How Does Arizona Tax Credit Work?

For example, a married couple must file their taxes in a joint account. They support Children’s Care Arizona, one of the state’s qualified charitable organizations (QCO). This couple can donate their tax credit at an $800 maximum. And since their passion is supporting low-income families with their child care and supervision needs, they choose Children’s Care Arizona with their goal to change lives one day at a time.

When this filing day came, this couple lowered their state tax liability by $800. Their donation to their chosen QCO is computed by a dollar-for-dollar conversion. Hence, when they donate $800 to Children’s Care Arizona for a noble cause, they can use it as a tax credit when filing taxes with the state.

Let’s look at it the other way around. The couple did not use their tax benefit for donation to any QCO. When it is the season of state tax filing, their money paid goes directly to the state’s general fund.

The Five Arizona Tax Credit Types You Can Choose From

There are various deserving charities and organizations doing exceptional work and effort to support Arizona families and individuals who need help the most. Refocusing your tax dollars to help your communities, organizations, schools, and families will be a blessing to many. Here are the top five Arizona tax credits and why they are essential.

#1 Military Family Relief Fund Credit

Donating your military family relief fund credit in Arizona will help support the finances of military members’ families, particularly those who are still in deployment, post 9/11 service officers, and veteran families. If you choose this tax credit, your donation will be processed by the Arizona Military Family Relief Fund Advisory committee, which should be in before the 31st of December.

However, you must note that the military family relief fund can only accept a maximum of $1 million per year. The donations received after the $1 million mark will be given back to their respective donors. Married couples having a joint account can donate up to $400 for their tax credit, while it is $200 maximum for individual taxpayers.

#2 Charitable Tax Credit

The charitable tax credit, commonly called the “working poor” tax credit, is an Arizona tax opportunity where you can donate your dollars to qualified charitable organizations to help low-income families, chronically-ill people with physical disabilities, or support individuals with temporary assistance programs in time of need.

$800 is the maximum donation set for married couples who are going to file their taxes under one account, while $400 is the limit for individuals for a charitable tax credit opportunity.

#3 Public School Tax Credit

The public school tax credit prioritizes supporting public and charter schools in Arizona. The donations given directly to these educational institutions are used for educational programs, extracurricular activities, and character development of the schoolers. The funds can also be to purchase school equipment, supplies, books, health care kits, or school meals.

If you plan to use your tax benefits for donation to public or charter schools, it is best to thoroughly read Arizona Form 322 for more information. Married couples having a joint filing account can donate up to $400, while individuals filing on their own can give a maximum of $200 on or before the 15th of April.

#4 Private School Tax Credit

This tax credit type assists middle to low-income Arizona families, giving them a chance to send their children to a private school within the state. In 2021, the state approved the maximum donation of $1,221 for married couples filing using a joint account. Individual filing can be up to $611.

The taxpayers can donate directly to the school of their choice, which must be a member of the certified school tuition organizations in Arizona. If you choose to use your tax benefits for donation to a private school, use Arizona forms 323 and 348.

#5 Overflow/ Plus Private School Tax Credit

This Arizona tax credit is one of the most recent tax benefits for donations that Arizona approved. With an overflow/ plus private school tax credit, the taxpayer must initially give a maximum donation using the private school tax credit. The same person will have a chance for additional tax benefits for donation as an “overflow” funding. The funds will be allocated for various scholarship types in participating private schools in Arizona.

The maximum additional tax benefit for donation for married couples under one joint account is $1,214 or $608 for individual taxpayers. A donor can recommend a specific student or school to receive the donation, which must be done before the 15th of April.

Bonus: Other Arizona Tax Credits

Besides the typical five Arizona tax credit types, there are other tax benefits for businesses that you may want to look into.

You may inquire with the Arizona Department of Revenue if you are keen on learning more about the other tax credit types.

Takeaway Thought

Tax credits are one of the opportunities that Arizona offers to help other people use their tax benefits for donations to qualified charitable organizations, schools, communities, and families. Using your Arizona tax credit money to help people with temporary assistance, child care, healthcare, and military family assistance is a step that may change a person’s life for the better.

Children’s Care Arizona is one and fully supportive of Arizona’s tax credit opportunity. We are a registered, qualified charitable organization helping support Arizona’s low-income families with child care, supervision, and school needs. Our volunteers help in various activities. Donate your state tax liabilities or be one of our volunteers. Together, we can start changing lives for a brighter future.

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