Saving on Taxes with Arizona Tax Credit Programs
As a Certified Financial Planner®, I put a lot of focus on tax planning for my clients. The goal is to keep as much money in your pocket as possible rather than paying it to the government. One of the great tools for Arizona taxpayers is the availability of Arizona Tax Credits. In this article, I’ll explain what exactly these tax credits are, how to use them and why they matter.
What is a tax credit?
A tax credit is different from a deduction. It is a dollar-for-dollar reduction in the income tax that you owe to the IRS. Rather than deducting a certain percentage of an expense, gift or donation, a tax credit allows you to get every dollar back when it comes time to pay taxes. For instance, if you end up owing $5,000 in taxes at the end of the year and have a tax credit of $1,500, your tax liability drops to only $3,500.
What are Arizona Tax Credit Programs?
Arizona Tax Credit programs include a number of different options for charitable donations where you would get all of the money you donate back as a tax credit. These include programs for charitable organizations, foster care organizations, student tuition (both public and private) and more. The great thing about these tax credits is not only the ability to reduce your tax bill, but also your control over where your tax dollars go. You choose the organization or cause that you want to support, rather than paying the taxes and letting the government decide where the money goes.
What Programs are Available?
The Arizona Charitable Tax Credit
Previously known as the “working poor” tax credit, the Arizona Charitable Tax Credit allows you to select a qualifying charitable organization (QCO) to donate up to $800 for a married couple or $400 for an individual taxpayer. This includes most of the charitable organizations in Arizona that you can choose from and decide who to support.
The Arizona Private School Tax Credit
Also called “Credit for Contributions to School Tuition Organizations,” this credit allows you to designate an individual student and contribute toward their private school tuition. These go through student tuition organizations like AZTO and allow you to select a qualifying school and student. This credit covers up to $1,221 for married couples or $611 for individual taxpayers.
The Arizona Public School Tax Credit
Very similar to the Private School Tax Credit, the Arizona Public School Tax Credit allows you to put your funds toward public or charter schools. These donations can be made up to $400 for couples filing jointly or $200 for individuals. These funds go to education programs,
extracurricular activities and other similar endeavors. Again, this is a great opportunity to choose where your dollars go and support your community or a school that you care about.
The Arizona Foster Care Tax Credit
The Arizona Foster Care Tax Credit allows you to put your donation toward a qualifying 501(c)(3) organization that works with over 200 foster children per year. This includes organizations like the Arizona Department of Child Services, Christian Family care and dozens of other, similar organizations. The amount for the Arizona Foster Care Tax Credit is up to $1,000 for married couples and $500 for individual taxpayers.
There are additional programs available that you can find on the Arizona Department of Revenue website. The other beautiful thing about using these tax credits is that you are not limited to just one of them. You can take advantage of all of these credits each year, allowing you to significantly reduce your income tax burden. More importantly, you have control over the causes and organizations where you want your money to go, rather than simply paying it as part of your tax bill each year.
If you are interested in learning more about tax planning or want some suggestions on how to reduce your tax burden this year, contact us and we can schedule a free consultation.
