Reduce Tax Liability with Tax Credits

Are you taking advantage of the Arizona tax credits available to reduce the amount of income tax you have to pay? If not, you should be. There are a number of opportunities available to benefit Arizona schools and other organizations—and contributing may not cost you a dime!

A tax credit gives you much more ‘bang for the buck’ than a deduction. A deduction reduces your taxable income, while a credit actually removes your tax liability—dollar for dollar. If you owe, the donation will reduce the amount owed, dollar for dollar. If you’re getting a refund, the credit will increase your refund, dollar for dollar.

For all of these credits, you no longer need to itemize your deductions in order to take advantage of them. And in most cases, these contributions also qualify as a federal tax deduction if you itemize your deductions! Sounds like a win-win-win for the taxpayer and the organization receiving the donation. Here are just a few of the tax credit opportunities available.

Personal Tax Credits

  • Public School Tax Credit: Arizona taxpayers can contribute to an Arizona public school. You can even count your child’s activity fees paid to their public school. Schools use these credits to help fund extracurricular activities, character education programs, prep materials for standardized testing and other qualifying activities.
  • Individual Private School Tuition Credits: Two private school tuition tax credits are available for individual taxpayers—if you contribute more than the maximum credit to a private school tuition organization, the remainder of your contribution may roll over to the certified school tuition organization credit. This effectively doubles the amount you may contribute to the tuition organization of your choice.
  • Qualifying Charitable Organizations: Formerly the Working Poor Credit, these contributions go to organizations that provide medical care, childcare, shelter and job training services to low income Arizona residents.
  • Qualifying Foster Care Organization Credit: This is a relatively new credit, first available for the 2013 tax year. Each of these organizations provide services to more than 200 Arizona foster children.

Not sure which organizations qualify? The Arizona Department of Revenue has a list of school tuition organizations and qualifying charitable organizations (with qualifying foster care organizations highlighted).

Here’s a breakdown of the credits available and the limits, depending on your filing status:

Credit Single, Head of Household, Married filing separately limit Married filing jointly limit Deadline
Public School (Form 322) $200 $400 April 15th of the following year
Private School Tuition (Form 323) $535 for 2015, indexed annually for inflation $1,070 for 2015, indexed annually for inflation April 15th of the following year
Certified School Tuition (Form 348) $532 for 2015, indexed annually for inflation $1,064 for 2015, indexed annually for inflation April 15th of the following year
Qualifying Charitable Org. (Form 321) $200 $400 December 31
Qualifying Foster Care Org. (Form 321) $200 $400 December 31

Other Tax Credits

Of course, contributing to education is not the only place you can save on your tax bill. Here are other tax credits you can capitalize on:

  • Renewable Energy for Self-Consumption: Arizona provides individual taxpayers with a solar energy credit if they’ve installed a solar energy device in their residence within the state. Qualifying devices include solar water systems, solar pool heating systems, wind generators and more. Read the Arizona Department of Revenue’s brochure on the credit for more information.
  • Corporate Tuition Tax Credits: Many Arizona C Corps and S Corps can contribute funds to a private school to help fund school scholarships with no contribution limit (but a minimum contribution of $5,000).

If you haven’t already taken advantage of a tax credit, hurry! You only have until Dec. 31 to make a contribution for the 2015 tax year. If you have questions about how you can take advantage of these or other tax credits, contact me today!