For complete details, refer to the Arizona Revised Statutes. In case of inconsistency or omission the language of the Arizona Revised Statutes will prevail. Please consult with your tax professional to understand how this information affects or does not affect your individual tax returns.
What is Arizona's Charitable Tax Credit?
Formerly known as the “Working Poor” tax credit, the Charitable Tax Credit allows Arizona taxpayers to claim a dollar-for-dollar credit when they make donations to qualifying charities, and RMHC of Southern Arizona is a qualifying charity.
- For 2022, the maximum amount of the credit is $400.00 for single taxpayers or heads of household.
- For Married taxpayers, the maximum credit is $800.00.
- Beginning in the 2023 tax year, the limits will increase each year with inflation, based on the Phoenix Metropolitan 12-month average consumer price index. The amounts will not be lowered, even if the CPI falls.
- If you make a donation starting January 1, 2023 through April 18, 2023, with the intent of claiming that gift on your 2022 AZ State tax return, the old limits apply.
- For tax year 2023, the amounts are $421.00 and $841.00, respectively. These amounts apply on the return you file in 2024.
- You may be able to make credit-eligible contributions through payroll withholding. Check with your employer to see if your employer has agreed to withhold contributions for this credit from your pay.
What is the Arizona Charitable Tax Credit Coalition?
Give Local. Keep Local.
The Arizona Charitable Tax Credit Coalition, or GiveLocalKeepLocal.org, is a collaboration between 30+ local Southern Arizona nonprofits. Ronald McDonald House Charities of Southern Arizona has worked together with our fellow charities to spread the word about the Qualified Charitable Organization (QCO) tax credit. This is a mutually beneficial partnership that has allowed taxpayers to better support their favorite causes.
GiveLocalKeepLocal has published a comprehensive Tax Credit Guide that will likely answer all of your questions. Of course, remember to consult your tax professional before making any financial decisions.GiveLocalKeepLocal.org
I already donate to my child's school. Can I claim this Credit too?
There are five different qualified areas eligible for a tax credit, and you may be able to claim each of them in the same tax year, up to your tax liability from that year.
Qualified Charitable Organization
Qualified Foster Care Charitable Organization
School Tuition Organization
Arizona Military Relief Fund
Each have different requirements and limits. Married couples can actually reduce their State liability by up more than $5,000.00 if they were to contribute the maximum amount to each of these credits.
Please note you can use the credits for any particular tax year only up to your liability for that same tax year. However, many of these credits can be carried forward for up to five years if they are unused.
I don't usually have to pay the State each April. Could I still benefit?
The Credit reduces your State tax liability, meaning that, 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 have the effect of reducing the money you owe to the State or increasing your refund.
But I thought this was a nonrefundable credit.
When we talk about refunds, there are two topics that are important:
- As a “nonrefundable” credit, taxpayers may not claim credit that is more than their tax liability (in other words, what you owe the state before you start to apply deductions and credits. Think “top of the form” not “bottom of the form”.). You may, however, carry the unused credit forward for up to the next five years.
- As stated above, though, if you prepaid your taxes though regular paycheck withholding or estimated taxes, the effect of the credits may be to increase your refund (as your liability may be reduced below your prepaid taxes).
When is the deadline to make a donation?
Credit-eligible contributions made to a Qualifying Charitable Organization or Qualifying Foster Care Charitable Organization that are made on or before tax day in April may be applied to either the current or the preceding taxable year for your Arizona State tax return.
As the maximum limits are adjusted for inflation, the new limits apply to the return you’ll file in the following year. For instance:
- If you make a donation from January 1, 2023 through April 18, 2023 with the intent of claiming that gift as a credit on your 2022 tax return, the $400/$800 limit applies.
- If you make a gift any time in 2023 or thorugh April 16, 2024, the $421/$841 limit applies.
- Confused? We don’t blame you! Remember to always contact your tax professional to learn about your specific situation.
In order for donations to qualify for your federal tax return, they must be made by December 31 of that tax year. (And remember that you can’t “double-dip”. If you’re claiming a gift as a State credit, that amount can’t also be claimed as a federal deduction.)
Do I have to itemize my tax returns?
You do not!
The requirement to itemize deductions on the State return has been eliminated. You cannot claim both a tax credit and an itemized deduction for the same contribution on your State return.
Additionally, beginning with the 2019 tax year, other donations (for which you do NOT claim the tax credit) may be eligible for a 25% deduction – even if you do not itemize and instead use the standard deduction.
How much can I contribute?
For the Qualified Charitable Organization Tax Credit:
For the 2022 tax year, the maximum credit is $400.00 for Single taxpayers or Heads of Household. For Married taxpayers, the maximum credit is $800.00. If married taxpayers file separate returns, each spouse may claim ½ of the credit that would have been allowed on a joint return.
Beginning in the 2023 tax year, the limits will increase to $421.00 and $841.00, respectively. If you make a donation starting January 1, 2023 through April 18, 2023, with the intent of claiming that gift on your 2022 AZ State tax return, the old limits still apply.
Keep in mind:
You may also claim credits for donations made to a public or private school, qualified foster care charitable organization, school tuition organization, and Arizona Military Relief Fund. The total credits applied can total more than $5,000.00 for a married couple or your total State tax liability, whichever is less.