Arizona Tax Credits

Arizona Tax Credits

Have you heard about the tax credits in Arizona, but want more information?  Hopefully this helps.  Please contact us if you would like further clarification or would like to know if you qualify to maximize one or more of the credits.

Understanding Tax Credits vs. Tax Deductions

A tax credit is a dollar-for-dollar reduction in your tax liability.  A tax deduction is a reduction of your taxable income.  For example, if you have $50,000 of taxable income and, accordingly, an Arizona tax liability of $1,500, the following would result:

1) A tax credit reduces your tax liability.  Regardless of your tax bracket, a $1,000 tax credit will reduce your tax by $1,000 (but will not reduce it below $0, so if your liability is $600, then $600 is the maximum credit you can claim). 

2) A tax deduction reduces taxable income.  If you are in a 25% tax bracket, a $1,000 tax deduction will reduce your tax by $250.

Therefore, it is important to know your expected Arizona tax liability to make an informed decision about the following Arizona tax credits.  Looking at your 2020 Form 140, line 48, is where you can find your 2020 Arizona tax liability.  If you make tax credit contributions greater than your total liability, you will not be able to maximize the credits for that tax year.  However, Arizona does allow you to carry forward any unused credits for up to 5 years. 

Public School Tax Credit

An individual may claim a nonrefundable tax credit for making cash contributions or for certain fees paid to a public school or charter school located in Arizona for the support of extracurricular activities or character education programs. The credit is equal to the amount of fees paid or cash contributions, not to exceed $400 for married filing joint filers and $200 for all other filing statuses.

You must receive a receipt from the school showing the school's name, school district, taxpayer's name, amount paid or contributed, date of the contribution, and a description of the activity being supported.

2020 tax credit contributions must be made before filing your return and no later than April 15, 2021.

Contributions to Qualifying Charitable Organizations

Arizona law provides a credit for cash contributions made to qualifying charitable organizations (see here for a list of charities qualified in Arizona).  The maximum credit for contributions made to these organization has been increased for tax year 2020 to $800 for married taxpayers filing jointly and $400 for all other taxpayers.

2020 tax credit contributions must be made before filing your return and no later than April 15, 2021.

Contributions to Foster Care Organizations

Certain organizations supporting children in foster care are eligible for an increased tax credit for 2020 of $1,000 for married taxpayers filing jointly and $500 for all others.  A list of qualifying foster care organizations is available here.

2020 tax credit contributions must be made before filing your return and no later than April 15, 2021

Private School Tuition Organization Credit

To qualify for this credit, you must make cash or payroll withholding contributions to a tuition organization that provides scholarships or grants to qualified schools.  For tax year 2018, the credit cannot exceed $2,213 for married filing joint taxpayers and $1,107 for all other taxpayers. 

2020 tax credit contributions must be made before filing your return and no later than April 15, 2021.

A list of qualified school tuition organizations can be found here

Military Family Relief Fund

This fund provides financial assistance to families of currently deployed service members and certain veterans and their families.  The statewide credits are limited to $1 million per year and must be made by December 31 and with prior approval. 

You can learn more about this credit here.


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