Arizona Tax Credit Alert – December 2012

The Arizona legislature has retained and expanded some of the incentives for charitable giving for 2012. These tax credits are for individuals only, and the dollar limits differ depending on marital status. Your payments will make a positive impact on the recipient organization, while at the same time reducing your state income tax liability dollar for dollar. Here are descriptions of the credits:

Public Schools – Form 322

A credit for contributions of up to $400 for a “married couple filing jointly” and $200 for unmarried filers is available for payment of fees to an Arizona public school or charter school for support of extracurricular activities or character education programs. Examples of these activities include field trips, sporting activities and fine arts.  The fee can be paid for the benefit of your child’s participation in a particular activity. Fees must be for the exact amount of the activity, and the activity must have a monetary charge in order to participate. Fees can also be paid to a central fund at the school to fund extracurricular activities for all students. In all cases the checks should be made out to the individual school.

Private School Tuition Organizations – Form 323

The tax credit for contributions to a School Tuition Organization is $1,006 for “married couples filing jointly” and $503 for an unmarried filer. The credit is available for a contribution that provides scholarships or grants to qualified elementary and high schools. Your contribution cannot be designated for the direct benefit of your dependent, but can be made to benefit a relative if they are not your dependent. Before making your contribution, make sure that the organization meets the rules set out by the Arizona Department of Revenue to qualify as a School Tuition Organization. A good list of these organizations can be found at http://www.azdor.gov/TaxCredits/SchoolTaxCreditsforIndividuals.aspx. The organization should give you a receipt showing the name and address of the school tuition organization, your name, your social security number, the amount paid, and the date paid. For 2012, this donation can be made as late as April 15, 2013 and still be claimed on the 2012 state tax return.

NEW FOR 2012 – PLUS “Switcher” Tax Credit Program – Form 348

In 2012, Arizona signed this new Private Learning Uplifting Students (PLUS) tax credit into law, allowing donors to receive credit for a contribution over and above the original tax credit.  Scholarships provided from donations that claim the additional (PLUS) credit are restricted to benefitting students that fit into specific categories that encourage school choice. With the PLUS “Switcher” tax credit, the total donation to School Tuition Organizations can be as much as $2,006 for “married couples filing jointly” and $1,003 for an unmarried filer. The Arizona taxpayer must first donate the maximum for the original School Tuition Organization Tax Credit ($503 unmarried filers and $1,006 for “married couples filing jointly”) in order to donate an additional amount for the PLUS “Switcher” tax credit. The maximum PLUS “Switcher” credit amount that may be taken for tax year 2012 is $500 for an unmarried filer and $1,000 for “married couples filing jointly”. For 2012, this donation can be made as late as April 15, 2013 and still be claimed on the 2012 state tax return.

Summary of 2012 Private School Tuition Organization Credits:

Tuition Tax Credits “Original” Tax Credit Maximum for 2012 “New” PLUS Tax Credit Maximum for 2012 Total 2012 Maximum Tax Credit

Married Joint

$1,006

$1,000

$2,006

Unmarried

$503

$500

$1,003

Tax Forms

Form 323

Form 348

Forms 323/348

Charities That Provide Assistance To The Working Poor – Form 321

A credit of up to $400 for “married couples filing jointly” and up to $200 for unmarried filers is available for cash contributions to a qualifying charity which includes those groups that provide services to the chronically ill or disabled children.  Many well-known organizations assist the working poor and qualify for this special deduction. Check http://www.azdor.gov/TaxCredits/WorkingPoorTaxCredit.aspx for the most current list of qualifying charities. You must itemize deductions to claim the credit.

Arizona Military Relief Fund – Form 340

A credit for contributions of up to $400 for “married couples filing jointly” and $200 for unmarried filers is available for payment of fees to the Military Family Relief Fund. The Arizona Military Family Relief Fund provides financial assistance for active duty service members, post 9/11 veterans and their families. Financial assistance is made available to assist with unforeseen financial hardships including those caused by service connected disabilities. Visit the website at http://dvs.az.gov/benefits/relief_fund.aspx to download the donation form. You must receive a receipt from the Arizona Department of Veterans’ Services that indicates the contribution qualifies for the credit in order to take this credit on your 2012 Arizona tax return.

These credits give you the opportunity to direct your tax money to the schools and charities of your choice at no cost. The state credits, totaling $3,206 for “married couples filing jointly”, and $1,603 for an unmarried person, can be claimed at one time. With the exception of the Military Family Relief Fund Credit, unused credits will be carried forward for five succeeding years until used. Depending on your individual situation, you may also be able to deduct the contributions on your federal tax return. Receipts should be retained for your records and provided to your tax preparer so they can account for it on your Arizonatax return. The contributions and fees need to be paid by December 31, 2012 (except the Private School Tuition Organization credits which can be paid up to April 15, 2013) in order to be reflected on your 2012 income tax return.

If you would like to know more about these credits or find out how they would apply to your specific tax situation for 2012, please contact us.