Many taxpayers wish to reduce or zero out their tax liabilities by other means rather than paying them in one big payment or installment. There are several tax credits that one can get directly without being assessed by the revenue department of its validity. Still, if a taxpayer knows the requirements, it would not be a problem to apply for an Arizona tax credit.

The Purpose of Tax and Tax Credit?

The purpose of taxes is for the government to gain revenue for its operations and expenditures. The government is composed of a wide range of people serving the state from all aspects of governance to meet its goals and visions. Tax credits do not exempt anyone from paying taxes but ease up the financial burden of low-income families and individuals. These tax credits also give some level of credit to individuals who donate and contribute to the community’s welfare.

The Arizona Tax Credit Types: How Does Do They Work?

An Arizona taxpayer can use several types of tax credits as this is a dollar-for-dollar reduction of the tax liability. It means that the tax due can be reduced by directly subtracting the tax credit one-to-one computation. Below are some types of tax credits that have no taxpayer requirements or has minimal requirements to be approved:

• Donating to Non-profit Qualifying Charitable Organizations certified by the State of Arizona: This Arizona tax credit is a non-refundable type that can reduce or zero out the tax liability of a taxpayer. If unused for the current tax season, it can be forwarded to the next tax season and is valid for five years. There is no minimum donation. Donating can provide the taxpayer with a maximum $400 Arizona tax credit when filing as an individual, head of household, or up to a maximum $800 tax credit for a married couple filing jointly. Use form 321 for filing donations for qualifying charitable organizations.The taxpayer is issued a receipt as a document to be attached to form 321 together with other documents when filing the internal revenue return (ITR). Be sure to claim the Arizona tax credit on or before the tax due date, the 15th of April. The State of Arizona has stopped providing a list of umbrella-type organizations, so the taxpayer should be directed to a designated qualifying charitable organization. Check out the certified list for 2022 at the State of Arizona Department of revenue.

• Donating to Non-profit Charitable Foster care organizations certified by the State of Arizona: These charitable organizations can provide an Arizona tax credit that does not have any requirements on the taxpayer’s income range, whether they are of low income, mid-income, or high-income taxpayers who are willing to donate to charitable organizations that give services to low-income individuals or families cannot afford basic needs. It is also the vision and goal of these qualifying foster care charitable organizations (QFCOs) to provide activities to improve the lives and self-esteem of foster care across the State of Arizona. Like qualifying charitable organizations, these fall under the IRS code under article (c ) 3, tax-exempt organizations.These tax-exempt organizations have to prove that they fall within the requirements specified under the IRS code. Any taxpayer can get a maximum $500 tax credit if filing individually, filing as head of household, or can earn a maximum of $1,000 for couples filing jointly. The taxpayer should get a receipt of the donation from the qualifying foster care charitable organization to be used as proof of the contribution to claim this Arizona tax credit. Use form 352 for claiming the tax credit for QFCOs separate from form 321 for QCOs. The taxpayer should donate and claim the separate tax credits on or before the 15th of April, which is the deadline for filing ITR. A five-number code is assigned by the State of Arizona Department of Revenue for each certified QCOs and QFCO. You can check a list of the Arizona QFCOs for 2022 from this link.
• Contributing to the Certified School Tuition Organizations: Like donating to charitable organizations, there is a tax credit for donating or contributing to Certified School Tuition Organizations, specific to educational purposes. Credits have been made available for donating individuals and corporate entities to organizations that provide scholarships enrolled to private schools. There are two types of non-refundable school tax credits under this, which is:
  • Credits made for donating to private schools tuition organizations. It is also called the original individual income tax credit. This Arizona tax credit can earn the taxpayer a maximum of $623 for single individuals or married filing ITR individually or as a head of household. In contrast, a maximum $1,245 tax credit can be earned by a married couple filing jointly. Use form 323 to claim the tax credit. A receipt from the certified organization should be attached. Be sure to file this with your ITR on or before the tax season deadline to claim your Arizona tax credit. This tax credit can reduce or zero out your tax.
  • Credits made for donating to certified tuition organizations ( Switcher individual tax credit ). Another separate tax credit can be additionally earned by donating to an accredited school tuition organization. It can be claimed using form 348. For 2022, the tax credit has been adjusted to reach a maximum of $620 for the single head of household filing individually or a maximum of $1,238 for married couples filing jointly.

• Public School Credits: This Arizona tax credit type is a non-refundable tax credit that can be earned by contributing or paying fees to public schools in the State of Arizona to support its activities, programs, or objectives set by its development needs. A taxpayer can claim this Arizona tax credit by using form 322. A maximum $200 tax credit can be claimed by an individual, head of household filing individually, or a maximum of $400 for married couples filing ITR jointly. The taxpayer should provide the Arizona Department of Education’s nine-digit code to identify the school. You can refer to the list on the Arizona Department of Revenue. Attached is a link to the lists of schools.