What’s the Arizona Charitable Tax Credit?
The Charitable Tax Credit allows Arizona taxpayers to claim a dollar-for-dollar credit when making donations to Southern Arizona Legal Aid, Inc. (SALA) and other qualifying nonprofits.
Need more details?
· For 2023, the maximum donation amount is $421 for single, married filing separate, or head of household
· For married filing joint, the maximum amount is $841
· Effective January 1, 2023, the limits will increase each year with inflation, based on the Phoenix Metropolitan 12-month average Consumer Price Index (CPI). The amounts won’t be lowered, even if the CPI falls.
· Check with your employer to see if payroll deductions are available to withhold contributions for this credit
· Use AZ Form 321 to file your return using SALA’s QCO Code number 20401
· No itemizing deductions
If I donated to a school, can I claim this credit, too?
There are five different qualified areas eligible for tax credits, and you may be able to claim each in the same tax year, up to your tax liability for that year. If unused, many of these credits can be carried forward up to five years. Each have different requirements and limits:
Qualified Charitable Organization
Qualified Foster Care Charitable Organization
School Tuition Organization
Arizona Military Relief Fund
What if I don’t usually have to pay the State?
Your donation reduces your State tax liability, meaning after all credits and deductions, you could be eligible for a refund if you had State taxes withheld from your paycheck or paid estimated taxes.
By reducing your initial liability, the credit could reduce money you owe or increase your refund.
What’s a nonrefundable credit?
As a nonrefundable credit, you can’t claim credit that’s more than your tax liability – what you owe the State before applying deductions and credits. Unused credits can be carried forward up to five years.
If you prepay your taxes though paycheck withholding or estimated taxes, the credits may increase your refund, as your liability may be reduced below your prepaid taxes.
Do I have to itemize?
The requirement to itemize deductions on your State return no longer exists. You can’t claim both a tax credit and an itemized deduction for the same donation on your State return.
Since 2019, other donations for which you don’t claim the tax credit may be eligible for a 25% deduction, even if you don’t itemize and instead use the standard deduction.
When’s the donation deadline?
The deadline is before you file – on or before April 14 at 11:59 p.m. – and may be applied to either the current or preceding tax year of your State return.
No double-dipping. If you claim your gift as a State credit, you can’t claim it as a federal deduction. To qualify as a federal deduction, your donation must be made by December 31.
It can be confusing! Please consult your tax professional regarding any financial decisions and implications for your tax return. GiveLocalKeepLocal created a comprehensive Tax Credit Guide to answer all your questions.
Refer to the Arizona Revised Statutes for complete details. In case of inconsistency or omission, the language of the Arizona Revised Statutes will prevail.