Tax credit contributions fuel non-profits and schools, help donors’ bottom line
They almost sound too good to be true.
But Arizona’s charity and education tax credits are very real, and completely legitimate. And they’re more than just a great way to save money on state and federal tax returns — they’ve become one of the most important fundraising tools available for hundreds of non-profits and schools statewide.
“It is a win-win for everyone,” said Christine Ewing of Ewing Consulting, a Phoenix-based fundraising consulting firm. “This legislation improves the quality of life for deserving Arizonans and should be taken advantage of for the benefit of all.”
If you’re not familiar with tax credit contributions, you should be. Here’s how they work in a nutshell:
Every year, you pay state income taxes to the Arizona Department of Revenue based on how much money you make.
However, state law allows you to receive a dollar-for-dollar credit on the amount of tax you pay if you donate to a qualified charity or educational institution in one of four categories:
• Arizona Qualified Charities, which is a general category most non-profits fit in. Contributions are limited to $400 per person or $800 per couple.
• Arizona Qualifying Foster Care Charitable Organizations, which as the title implies encompasses non-profits who provide foster care services. Contributions have a $500 limit for individuals and an $1,000 limit per couple.
• Public Schools, including charter schools, with a $200 per person and $400 per couple limit
• Private School Tuition Organizations, which fund contributions to private schools, which have a $1,087 total limit per person and $2,183 limit per couple
So, for example — say you give $800 to an Arizona Qualified Charity. As a result, your state income tax owed is reduced by $800. Period.
And, you can claim that same $800 charitable contribution on your federal taxes, lowering your federal tax bill as well. It’s a net win compared to paying tax dollars to the state, and you directly contribute to these beneficial organizations instead.
“Arizona tax credits are an intriguing, if not brilliant, use of your charitable dollars,” said Carolyn Sechler, a Valley accountant and tax expert. “By choosing to support charities who qualify by Arizona criteria in one of these categories, you convert a reduction in Arizona taxable income to a reduction in Arizona state income tax, dollar for dollar. In fact, even if you don’t itemize, you may benefit from these tax credits.”
With all the different categories, individuals can save as much as $2,187 and couple as much as $4,383 on their state tax bill, while claiming the same amount of contributions on their federal taxes as well.
Arizona law changed last year as well to allow for these contributions to be made all the way up to the April 15 tax deadline and still count for the 2016 tax year (contributions made in 2017 would count for your 2017 federal taxes, however). So it’s crunch time right now for many organizations who rely on these contributions for funding.
“Increased contribution limits and extended deadlines have made it easier for Arizona taxpayers to take advantage of some, if not all of the credits available to them when filing state income taxes,” Ewing said.
Sechler said that these tax credits are a rare case of something that seems too good to be true actually being true.
“This tax credit is an opportunity for you to direct your tax dollars by sending these funds directly to the charities you wish to impact versus leaving the money with the state to allocate at their discretion,” she said. “You get to take these allocations into your own hands.”
The State of Arizona requires each organization to meet certain criteria in order to be eligible for the tax credit program. The resources they provide include:
Arizona Qualified Charities:
Link to the overview page | Full list of eligible charities
Arizona Qualifying Foster Care Charitable Organizations:
Link to the overview page | Full list of eligible charities
Public Schools:
Link to the overview page | Database of public schools
Private School Tuition Organizations:
Link to the overview page | Full list of eligible organizations
Tax Credit Directory Now Online
Frontdoors Media has launched a new online directory to provide more information on non-profits and educational organizations eligible for tax credits. These non-profits have been screened to ensure their eligibility for such contributions, and provided the information in the directory to help donors decide where to contribute.
We encourage our readers to check out the directory and to contribute directly to the causes and organizations of their choice. It’s an easy way to support many beneficial community causes and educational programs while saving money on your tax bills and your bottom line.
Click here or click the image above to view the directory. And thank you for your support.
