Tax Credit Contributions Help Nonprofits Serve During Pandemic, Benefit Arizona Residents

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Posted By on November 12, 2020

To see a full list of Maricopa County participating organizations, click here.

To see a full list of Bullhead City Area participating organizations, click here.

Here is an update on the five Arizona tax credits available to you this tax season:

The nonprofit world has been immensely disrupted by the coronavirus pandemic, especially when it comes to fundraising. As Americans struggle with the economic and public health realities of COVID-19, nonprofits are trying to do more with fewer resources.

That’s why many nonprofits are relying more than ever this upcoming year on tax credit contributions, which provide donations to nonprofits while giving donors a break on state income taxes.

The State of Arizona offers an opportunity to receive a dollar-for-dollar credit on your state income taxes when you donate to qualified organizations in five categories:

  • Arizona Qualifying Charitable Organizations provide basic needs to qualifying low-income families and individuals, the chronically ill and disabled. Limits are $400 for individuals and $800 for married couples.
  • Qualifying Foster Care Organizations, with corporation limits of $500 for individuals and $1,000 for married couples.
  • Public School Tax Credit Organizations, with limits of $200 and $400.
  • Private School Tuition Organizations, for which limits increased this year to $593 for individuals and $1,186 for couples. Contributions can be made directly or by a shareholder when paid by an S corporation.
  • Certified School Tuition Organizations (also known as the “Switcher” Individual Tax Credit). These organizations may receive your contribution if you’ve already maxed out the Private School Tuition Organization credit first. Limits for these increased to $590 individually and $1,179 for married couples. Contributions can be made directly or by shareholder when paid by an S corporation.

Additionally, corporations can qualify for two types of credits for contributions made to Certified School Tuition Organizations. But they must apply for approval for part of a statewide capped credit amount before making their contribution. The first is the Low-Income Corporate Tax Credit (statewide cap is $123,042,188). The second is the Disabled/Displaced Corporate Tax Credit (statewide cap is $5 million).

Many people think it sounds too good to be true, but it’s not. You can give to a qualified charity or tuition organization instead of giving it to the state government for taxes. Over time, these contributions have become increasingly popular for Arizona residents.

Gerald Wissink, CEO of BHHS Legacy Foundation, said tax credit contributions impact the Backpack Buddies program Legacy Connection provides as well as the many nonprofits the foundation supports.

“Tax credit contributions are vitally important to Legacy Connection’s Backpack Buddies program,” he said. “In Arizona, where one in four students lives in poverty, many children miss school because they don’t have clothes or supplies. Thanks to tax credit donations, we are able to make a powerful difference in the lives of Arizona families.”

Aaron Blocher-Rubin, CEO of Arizona Autism United, said that tax credit contributions are tremendously helpful to his organization, which qualifies under the foster care tax credit.

“The Charitable Organization Tax Credit program is an amazing opportunity for Arizona residents to build community support for local families living with autism,” he said. “The tax credit makes it easy for everyone to do their part in improving our community. It is a perfect way for taxpayers to have a say in where their tax dollars go, and to provide meaningful support for organizations they believe in. With the generosity of our supporters, AZA United has been helping Arizona families for 15 years.”

A few other changes were made this year, according to Brenda Blunt, partner with Eide Bailly LLP.

Blunt said that with the increased Standard Deduction under the Tax Cuts and Jobs Act (TCJA), many people do not get a tax benefit from making charitable contributions other than these credit programs, because it does not benefit them to itemize their deductions. But under the CARES Act, passed in response to the pandemic, taxpayers who make contributions that do not qualify for the credits (because they are over the thresholds, or are to a non-qualifying charity) can take a $300 deduction, even if they do not itemize.

“There has been a push in Congress to increase this to $600 as part of a new round of COVID-19 relief, but they have not yet been able to agree on a package,” Blunt said. “Hopefully, there will be more to come on this. The CARES Act also included some other charitable incentives for bigger donations. Higher-income, charitably minded people may want to talk to their tax advisers.”

These contributions are an essential way for Arizonans to support their favorite charitable causes during difficult times.

“This is your chance to invest in Arizona’s future,” Wissink said. “Thanks to the Arizona Charitable Tax Credit, you can decrease your Arizona tax bill — or increase your refund — by $400 or $800. That means your gift ends up costing you nothing. It is a simple but powerful way to reach out and impact our community.”

DOWNLOAD our printable PDF guide to tax credit contributions.

Tom Evans

About Tom Evans

Tom Evans is a contributing editor of Frontdoors Media.