Important changes! – Individual Arizona tax credits for 2018

December 10, 2018 - 7 minutes read
School Contributions

There are a number of different Arizona Charitable, and Education Arizona tax credits available to taxpayers that can reduce your Arizona taxes! While the tax credits are nonrefundable, they can be carried forward and applied to future Arizona taxes due. The credit amounts given below are for 2018 returns filed jointly by a married couple. Single tax returns would be half the Arizona tax credits amounts listed. Here are the details for 2018….

Note – unlike prior years the Arizona Tax Credits program is no longer tax deductible on your Federal tax return – unless your qualified tax credit contributions were made prior to August 27, 2018 or you decide not take your Arizona Tax Credits on your Arizona tax return. Here is a link to an article we published in August 2018 outlining the new rules.

Contributions to Charitable Organizations

Form 321 – Contributions to Qualifying Charitable Organizations (QCO). (This used to be known as “The Working Poor Credit.”) This maximum credit is $800, which is the same as 2017. The Arizona Department of Revenue has compiled an 11-page list of organizations that qualify for this credit. Here is a link to that list of QCOs.

Contributions to Foster Care Organizations

Form 352 – Contributions to Qualifying Foster Care Charitable Organizations (QFCO). This maximum credit is $1,000. The Arizona Department of Revenue has compiled a 1-page list of organizations that qualify for this credit. Here is a link to that list of QFCOs.

Contributions to Public Schools or Paying Fees

Form 322 – Credit for Contributions made or Fees Paid to a Public School. This is the so-called extra-curricular credit. The maximum credit is $400. Even if you do not have a child in school, you can make this donation for another kid (say, a neighbor, friend or relative) and have it go directly to their account. (This is how kids sometimes raise money so they can go on a band trip or overseas study trip.) Most schools will qualify for this credit, but ask before donating to make sure.

Contributions to Private School Tuition Organizations

Form 323 & Form 348 – This is the School Tuition Organization (STO) tax credit. There are two parts to this credit, which is why there are two forms involved — Form 323 and Form 348. The so-called “Original” credit has been around for a number of years, and is computed on Form 323. The maximum credit on Form 323 is $1,110.

The second part of this credit, which is reported on Form 348, is sometimes referred to as the “Overflow/PLUS” credit. The maximum credit on Form 348 is $1,103. To get the credit on Form 348, you must first donate the maximum credit on Form 323. If you do contribute the maximum on both forms, you can claim a total credit of $2,213. (Note that the Form 348 credit was new in 2013.)

Here is a link to a list of the STOs approved for 2018:

Here is a link to a nice little publication (Pub 710) that the state puts out regarding school tax credits claimed on Forms 321 and 352:

Military Family Relief Fund

Form 340 – Credit for Donations to the Military Family Relief Fund. This credit is one that many people have not heard of, but it is worth $400. This credit is capped at a total of $1 million for all donations in a given tax year. They will hit the $1 million cap in early December, so if you want to donate to this, you should do it sooner rather than later. This credit is administered by the Arizona Department of Veterans’ Services. Here is the form that you need for the donation:

So, what does that come to and what are your options…

Note that the deadline for making donations to the first four credits listed above is April 15th of the year following the tax year. For example, for 2018 tax returns, you will have until April 17, 2019 to make a donation and claim the credit on your 2018 Arizona tax return.

If you donated the maximum to all of these types of credits, the total for 2018 will be $4,813. To qualify for the Federal deduction for 2018 you would have needed to make your contributions before August 27, 2018. Contributions made after that date you can take 1 of 2 options:

  1. Take the eligible tax credits (a dollar for dollar reduction of your Arizona tax. If you owe $1,000 your tax savings is $1,000) on your Arizona tax return OR
  2. Take a charitable tax deduction on your federal tax return. Deductions reduce your income subject to tax. If you’re in a marginal tax bracket of 25% your tax savings on a $1,000 contribution would be $250,

We have many clients who max out these credits each year. It’s a nice way to take a chunk of your tax dollars and direct them to causes that are important to you. Just make absolutely sure that before you send any organization any money, they qualify for the credit that you are considering.

Be sure to contact us if you have any additional questions!