Arizona Targeted Tax credits

Charlene M. Ives, CPA, PC

Charlene M. Ives, CPA, PC

Many taxpayers in Arizona will need to pay Arizona income taxes. One way to pay these taxes is through withholding from salaries or other income sources.

An alternative way to pay your Arizona income taxes is by using the targeted tax credit programs. These programs provide a way for Arizona taxpayers to direct their tax dollars to specific purposes. There are three targeted tax credit programs:

First, taxpayers filing a joint return for 2020 can get a credit for every dollar up to $800, when donated to qualifying charitable organizations. Single filers can donate up to $400. These contributions must be paid by April 15, 2021 for 2020 tax returns.

Second, taxpayers filing a joint return for 2020 may get a credit for every dollar up to $2,365, donated to private school tuition organizations. Single filers may contribute up to $1,183. These contributions can be done up to the filing deadline for 2018 which is, April 15, 2019.

Third, taxpayers may get a credit for every dollar up to $500 ($1,000 for joint filers), donated to qualifying foster care organizations. These contributions can be paid by April 15, 2021 for 2020.

All three tax credit programs can be used in a single year. There are provisions for carrying over unused credits. Taxpayers can receive charitable contribution deductions for these donations on their Federal tax returns. AZ tax credit programs direct tax dollars into the school of your choice instead of into the AZ general revenue system. These credits work as an offset to tax that would otherwise be payable to the AZ Department of Revenue. Some charitable organizations seem to promote the idea that the programs generate "free money". this is a misconception. the credit programs do not represent tax savings. Instead they allow a file to direct tax dollars to charitable organizations.

Check these websites for more details and information:

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