What is an Arizona Qualifying Charitable Organizations Tax Credit?
(Formerly known as the Working Poor Tax Credit)
The Arizona Charitable Tax Credit is a dollar-for-dollar tax credit for charitable contributions you give to qualifying 501 (c)(3) non-profit corporations (nonprofits). With Arizona’s Charitable Tax Credit you can receive a state tax credit up to $400 if filing single or $800 if filing a joint return, on your state income taxes.
How does a non-profit qualify for Arizona Charitable Tax Credit?
Matthew's Crossing Food Bank qualifies as an Arizona Charitable Organization that provides assistance to residents of Arizona who either receive Temporary Assistance of Needy Families (TANF) benefits, are low income residents of Arizona, or are children who have a chronic illness or physical disability. Starting with the 2013 tax year, taxpayers do not have to itemize deductions to claim a credit for contributions to a Qualifying Charitable Organization or Qualifying Foster Care Charitable Organization. For 2012 and prior, taxpayers were required to itemize deductions on their Arizona return in order to claim a credit for contributions to a Qualifying Charitable Organization. (link to AZ Dept of Revenue)
What is the difference between a tax credit and a tax deduction?
A tax credit is significantly more beneficial than a tax deduction. A tax credit reduces your Arizona State taxes, dollar-for-dollar. A tax deduction reduces the taxable income upon which your tax liability is calculated.
Can I take the Arizona Charitable Tax Credit if I take the School Tax Credit?
Yes, they are separate and you are allowed to take advantage of both.
Does the tax credit also apply to my federal income tax return?
No. The amount you donate (up to $400 for a single individual or $800 filing jointly) only qualifies for the Working Poor Tax Credit on your Arizona State tax return. Consult your Tax Advisor for a deduction on your federal tax return.
Can I qualify for this credit if I donate through a Workplace Giving Program?
Yes. If you donate through a payroll deduction program in your workplace, you qualify for this credit.
What happens if I don't owe State taxes at the end of the year?
The Arizona Charitable Tax Credit reduces your overall state tax liability and is not impacted by your tax withholdings during the course of the year. If you withheld more than what you owed, the credit will result in an increase in your state tax refund. If you have no Arizona tax liability for the current year, you may carry the tax credit forward for up to five (5) years.