The Arizona legislature has retained and expanded some of the incentives for charitable giving for 2021. This alert explains the credits for individuals only. 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 Arizona income tax liability dollar for dollar. Here are descriptions of the credits:
Private School Tuition Organizations – Form 323
The tax credit for contributions to a School Tuition Organization is $1,221 for “married filing joint” and $611 for all other taxpayers. 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 or any other student 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. Here is a link to the list of the 2021 qualified School Tuition Organizations. The organization should give you a receipt showing the name and address of the school tuition organization, your name, the amount paid, and the date paid.
PLUS “Switcher” Tax Credit Program – Form 348
The Private Learning Uplifting Students (PLUS) tax credit allows donors to receive credit for a contribution over and above the original tax credit. The Arizona taxpayer must first donate the maximum for the original School Tuition Organization Tax Credit in order to donate an additional amount for the PLUS “Switcher” tax credit. The PLUS “Switcher” credit amount for 2021 is $1,214 for “married filing joint” and $608 for all other taxpayers.
Summary of 2021 Private School Tuition Organization Credit Maximums:
|Filing Status||Form 323 “Original” Tax Credit Maximum for 2021||Form 348 PLUS Tax Credit Maximum for 2021||Combined|
|Married Filing Joint||$1,221||$1,214||$2,435|
|All Other Filers||$611||$608||$1,219|
Donations made between January 1, 2022 and April 15, 2022 can be claimed as a credit on either your 2021 or 2022 state tax return.
Public Schools – Form 322
A credit of up to $400 for “married filing joint” and $200 for all other filers is available for payment of fees to an Arizona public school or charter school for extracurricular activities or character education programs. Examples of these activities include field trips, sporting activities, and fine arts. The fees can be paid for the benefit of your child’s participation in a particular activity. Fees must not exceed the actual costs of the activity. Contributions 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. Here’s a list of public schools eligible for this credit. Fees or donations made between January 1, 2022 and April 15, 2022 can be claimed as a credit on your 2021 or 2022 state tax return.
Qualifying Charitable Organization (QCO) – Form 321
A credit of up to $800 for those filing as “married filing joint” and up to $400 for all other filers is available for cash contributions to a qualifying charitable organization (QCO). This includes those groups that provide services to chronically ill or disabled children and here is a link to the list of qualifying charitable organizations for 2021. Beginning in 2018 a unique code has been assigned to each organization. It will be extremely helpful if you provide the receipt from the qualifying charitable organization so that we may easily access that code. Taxpayers do not have to itemize deductions to claim a credit for contributions to charities that provide assistance to these low-income residents of AZ or individuals with chronic illness or physical disabilities. Many well-known organizations assist these residents and qualify for this deduction.
Qualifying Foster Care Charitable Organizations (QFCO)– Form 352
A credit of up to $1,000 for those filing as “married filing joint” and up to $500 for all other filers is available for cash contributions to a qualifying foster care organization (QFCO). Here is a link to the list of qualifying foster care charitable organizations for 2021. Beginning in 2018 a unique code has been assigned to each organization. It will be extremely helpful if you provide the receipt from the qualifying charitable organization so that we may easily access that code. A contribution to a QFCO does not qualify for, and cannot be included in, a credit claimed as a contribution to a QCO on Form 321.
Arizona Military Family Relief Fund – Form 340
A credit for contributions of up to $400 for “married filing joint” and $200 for all other filers is available for contributions made to the Arizona Military Family Relief Fund (MFRF). The MFRF provides financial assistance for active duty service members, pre-9/11 and post-9/11 veterans and their families. Financial assistance is made available to assist with hardships caused by and related to combat zone deployment. Before you can claim this credit you must have received a receipt from the Arizona Department of Veterans’ Services that indicates the contribution qualifies for the credit. The donations to this fund are capped at $1M per year. Here is a link to the organizations that qualify for this credit.
S Corp. Private School Tuition Credits Passed Through to its Individual Shareholders
An S corporation that qualifies for corporate private school tuition credit may elect to pass through the credits to its individual shareholders. An S corporation that elected to do so would claim the approved corporate private school tuition tax credits on AZ Form 335 and/or 341. The corporation must obtain a copy of the school tuition organization’s pre-approved application and file it with its tax return. The S corporation must provide its shareholders with AZ Form 335-S and/or 341-S. The shareholders then use AZ Form 335-I and/or 341-I to claim the credits on their personal tax returns. These credits may be claimed in addition to the two individual private school tuition credits and are not subject to limitations that apply to the individual private school tuition credits.
Arizona Credits Summary
The credits described above give you the opportunity to direct your tax dollars to the schools and charities of your choice at no cost. The state credits totaling $5,035 for “married filing joint” and $2,519 for all other filers can be claimed at one time for contributions made individually. With the exception of the Arizona Military Family Relief Fund Credit, unused credits will be carried forward for five succeeding years until used. Receipts should be retained for your records and provided to your tax preparer so they can account for it on your Arizona tax return. Contributions and fees paid by April 15, 2022 (except the Arizona Military Relief Fund and the S Corp. Private School Tuition Credits which must be paid on or before December 31, 2021) may be claimed on your 2020 income tax return. Under proposed federal tax regulations issued on August 23, 2018, you will no longer receive a federal tax deduction if a donation is allowable as an Arizona tax credit.
If you would like to know more about these credits or find out how they would apply to your specific tax situation for 2021, please contact BeachFleischman.