A helpful guide to using AZ charitable tax credits

Contributing to qualifying charities and organizations that are important to you via the Arizona Charitable Tax Credit is a way to help cover all or some of your state tax liability (what you might owe in taxes) for 2019 and for future years. 

Important note: Although the deadline for filing and paying state taxes has been extended to July 15, you still have to make your tax credit contributions by April 15. 

Nate Eggman, a tax manager with R&A CPAs, a Tucson-based accounting and tax firm, helped answer some questions about what this credit is and how to use it. Note: you'll want to check in your tax professional to get guidance and advice specific to your situation.

What is the Arizona Charitable Tax Credit?

Arizona offers dollar for dollar tax credits for contributions made to Qualifying Charitable Organizations and Qualifying Foster Care Organizations, but there are limits to the amount of contributions that you can receive a credit for. 

For Qualifying Charitable Organizations (QCOs):

• If you're single, head of household or married filing separately the maximum tax credit amount is $400.
• If you're married filing jointly the amount is $800. 

For Qualifying Foster Care Charitable Organizations (QFCOs)

• If you're single, head of household or married filing separately, the maximum tax credit amount is $500. 
• If you're married filing jointly the amount is $1,000.

How do these credits work?

"(They're) non-refundable tax credits. So you if you owe taxes, then the credit will go against that tax liability first," Eggman says. "If you donate more than your tax liability, then the excess tax credit will carry forward for five years."

Eggman says it's common for people to make their tax credit contributions after they work on their tax returns and determine what their liability is. Then they report that contribution on their tax return before filing it. 

How do you know if an organization qualifies for the Arizona Charitable Tax Credits?

The Arizona Department of Revenue has lists of all of the 2019 Qualifying Charitable Organizations here, and the Qualifying Foster Care Charitable Organizations here. 

Eggman says it's important to check these lists each year and not assume that an organization you have contributed to in previous years still qualifies. 

Do you have to make one large donation to an organization, or can you make smaller contributions to several of these QCO's or QFCO's?

"You don't have to contribute the (maximum) amount to just one," Eggman says. "You can spread it out however you like."

Is there a deadline to make your contribution?

Yes. The deadline is April 15. 

Although the deadline for filing and paying state taxes has been extended to July 15, you still have to make your tax credit contributions by April 15. 

Why should someone consider using these charitable tax credits?

Eggman says most people choose to contribute to qualifying organizations so they can support the causes and organizations that are important to them. 

"You get to choose where your tax dollars are going and how you're going to help your community," Eggman says. "A lot of these charitable organizations that qualify are our charities that are helping out the community that need it the most." 

What other state tax credits are available?

There are three school tax credits: the Public School Tax Credit, Private School Tuition Credit and the Certified School Tuition Organization Credit which people can also make contributions to. You can find more about these tax credits and the maximum contributions here. 

There is also a tax credit for donations made to the state's Military Family Relief Fund, but it has a $1 million cap on donations made that qualify for the credit and that cap has already been reached for 2019 taxes. The credit will be available for 2020 donations and more information can be found here. 

Can you make the maximum contributions to all of the qualifying tax credit categories?

Yes, you can make the maximum contributions for each tax credit and the amounts would cover your tax liability or carry over for up to five years.