Every year, the State of Arizona provides various individual tax credits. You may also get tax credit federal deductions as stipulated by the IRS. The tax credits and deductions enable willing taxpayers to support charities and qualifying organizations. You can enjoy dollar-for-dollar reductions to your tax liabilities by supporting Paz De Cristo.
You may have already heard about tax credit federal deductions and the Arizona working poor tax credit. However, you may not be fully aware of how to maximize the use of such tax credits for community service. Understanding how Arizona tax credits work can open up a community service opportunity while helping you to allocate your taxes to a great cause.
While this guide may be thorough, it is not intended to serve as tax, legal, or accounting advice. Consult your CPA or any other professional advisor before acting on the information herein.
How Does the Arizona Charitable Tax Credit Work?
The Arizona tax credit is a non-refundable income tax credit. It allows taxpayers to make charitable contributions to qualifying charitable organizations and qualifying foster care charitable organizations.
The maximum allowable tax credit is $800 for married couples filing a joint return and $400 for an individual for a QCO. For QFCOs, the maximum limit is higher at $1000 and $500, respectively. It means that you can reduce your state tax burden for each dollar you give to Arizona tax-deductible charities.
The History of The Arizona Working Poor Tax Credit
The Arizona charitable tax credit program started in 1998, commonly known as working poor tax credit. In 2012, the tax credit and deductions were expanded to include certified tax-deductible charities that support the most vulnerable Arizonians.
How To Utilize Tax Credit Federal Deductions
The IRS makes it clear that an individual taxpayer filing their forms needs to subtract any benefits from their charitable giving from the tax credit federal deductions. For example, if you donate $400 to a tax-deductible charity and receive a $100 gift certificate, you may have to deduct the benefit and claim a $300 tax credit.
Additionally, tax credit federal deductions honor the carry forward rule as stipulated by the IRS. Just like in the State of Arizona, you can carry forward your tax credits up to a maximum of five consecutive years.
You can only carry over the portion of the credit that you do not apply to tax. However, you cannot carry over any contribution you gave that was more than the maximum allowed for credit. You can check the IRS website for more guidelines on the tax-deductible filings.
New Tax Credit Federal Deductions Limit for Charitable Donations
Up until recently, the IRS set the limit for individual charitable giving to no more than 50% of the taxpayer’s adjusted gross income. New rules from 2018 stipulate an increase to 60% of the adjusted gross income, allowing you to provide more support to Arizona tax-deductible charities.
Arizona charity tax credit and tax credit federal deductions make it easier for you to support your favorite volunteer community service organizations while saving money at the same time. Your contribution makes a real difference to Arizonians in need. To get involved in supporting local food boxes in Mesa, AZ, reach out to Paz De Cristo.