3 Myths About the Arizona Charitable Tax Credit, Busted

The Arizona Charitable Tax Credit has changed over recent years, so you may not be up to date with all of the existing rules. Or perhaps you’re just finding out about it and are looking to understand it a bit more clearly. Whatever the case may be, we’re here to get you up to speed on some ins and outs of the Arizona Charitable Tax Credit.

Myth #1: Donations Can Be Made By Corporations

In order to claim the Arizona Charitable Tax Credit, a donation has to be made by individuals. Organizations such as corporations, partnerships, foundations, and more do not qualify. Another thing to keep in mind is that the donations must be made in cash and that items donated such as clothing, toys, and services do not count.

This limitation shouldn’t discourage corporations from making donations of money, items, or time, however! There are plenty of ways for organizations to get involved with Paz de Cristo. Groups are welcome to help out with our evening meals. Paz de Cristo has offered dinner to the community every night since 1988, and we’d love it if your team could be a part of that!

Myth #2: The Maximum Allowable Credit Is $400

While this is true for single taxpayers, those who are married and filing separately, and heads of households, it is not true across the board. When it comes to joint taxpayers, the maximum allowable credit is actually $800! When you direct these funds to Paz de Cristo, we put them towards our goals of feeding, clothing, and empowering those in our local area. We do this by providing Grab n’ Go dinners and emergency food boxes, offering showers and clothing on a weekly basis, and providing requested documentation and mail to community members.

Myth #3: You Need to Contribute Before Dec 31 to Receive the Credit

Many people operate under the misunderstanding that Arizona taxpayers must make their charitable contributions prior to December 31 to be eligible for state tax credits for that year. Arizona permits taxpayers to claim tax credits for gifts through April of the current year for the tax year prior. The deadline for making a charitable contribution was moved to mid-May for taxpayers looking to file and claim for the 2020 tax year.

In the year 2020, most charitable dollars went to religion, with education, human services, grantmaking foundations, and public-society benefit following afterward. Whatever you’re donating to, be sure that you are making the most of your donation and claiming your Arizona tax credit federal deduction. We at Paz de Cristo would be happy to work with you, explaining the process more thoroughly and seeing how you could contribute to the hard work that we do.

How Paz de Cristo Is Getting People Through the Pandemic

There are currently over 1.54 million charitable organizations in the United States, according to the most recent available data. Paz de Cristo is one of these many charities striving to improve the lives of those in the community that we serve. While there has always been crucial work to do, the importance of our duty has only increased since the start of the pandemic. Here are just a few ways that we are working to take the weight off people’s shoulders.

Offering Clothes

Providing clothing to those who need it is not a responsibility that we take lightly. It’s an essential service that we are happy to provide. We are happy to provide showers for those who need them on Wednesdays from 8:00 AM to 12:00 PM. In addition to getting clean, individuals can receive a hygiene kit as well as some wardrobe necessities — underwear, socks, and a new t-shirt. This is not the only available time where people can come to us for clothes, however. We also offer $30 clothing vouchers on Thursdays at 1:00 PM. Clothing is also available at our dinner hour.

Providing Meals

There are more people in need of a hot meal than many of us are aware of. While someone may appear to be thriving on the surface, the reality is that they could be worrying about where their next meal is coming from. This fact may be uncomfortable for many to discuss, but it’s something that’s important to be aware of, and it’s why we are passionate about putting food on the table for whoever needs it in our community. We offer nightly dinners, as well as emergency food boxes and food boxes for the homebound.

Building Confidence

When faced with a circumstance that may sometimes feel out of our control, having autonomy is truly empowering. This is the reason why we offer people methods of accessing their mail, birth records, and Arizona identification. In addition, we have a mobile medical clinic set up for two hours every Wednesday, from 10:00 AM to 12:00 PM. Giving community members ways to obtain their own information and basic medical care is something we are truly proud of.

To learn more about Paz de Cristo and our efforts to help those suffering from the emotional and financial effects of COVID-19, give us a call or visit our website, www.pazdecristo.org.  Whether you are looking for a volunteer opportunity or a way to donate our working poor charity, we encourage you to reach out.

How Donating Helps Your Business Save on Taxes

how does the charitable tax credit work

Over 22,000 people in Maricopa County were homeless last year. With such a statistic, many businesses feel the need to get involved. When small businesses donate to charitable organizations, like Paz de Cristo, it does more than boost employee morale and increase the well-being of your community. There are tax breaks associated with charitable giving that can be given to small businesses — they aren’t just for individuals. If you own a business that is considered small or medium-sized and are dedicated to bettering the lives of those around you, you can benefit as well! You can receive tax breaks if you carefully follow the steps we’ll be discussing in this article.

Educate Yourself on Donations

There are rules to donating funds and items that not only make the process easier for you but are required in order to receive a tax break. To take a charitable deduction, you must ensure that you itemize your deductions. To do this, you should be certain that your total deductions are greater than your standard deduction. Otherwise, you should keep to the standard deduction. 

Knowing what types of donations are deductible, and to what length, is integral, as not all donations are considered equal by the IRS. Say you are traveling to a location to volunteer your services for Paz De Cristo. Perhaps you are taking time to feed evening meals and food boxes to the hungry. The money spent on travel would qualify as deductible, but the time spent volunteering is not. The rule of thumb is that money spent on donations is deductible while time and energy spent on community service opportunities are not. Both actions are valuable and support the community, but it’s good to know and keep record of these for tax purposes.

Should you choose to donate tangible items such as clothing, toiletries, toys, or furniture to those in need, the quality of the items is also important to note. The IRS recognizes items that are in ‘good condition or better’ as deductible. Should you decide to donate clothing in good condition to Paz de Cristo, it could be used for our guests to receive a fresh start.

Keep Track of Funds Directed

Keeping thorough records of donations, whether they be cash or clothes, is vital for receiving a tax break. Card statements, payroll deductions, and proof of donation are all things to keep a record of. If you’re donating more than $250, the IRS needs a letter of acknowledgment of some form, so keep these stored away for tax filing season.

If you have further questions about tax breaks, such as ‘How does the charitable tax credit work?’, or would like to get involved with Paz De Cristo, reach out today! We’d love to hear from you.

Can’t Donate? You Can Still Help Paz De Cristo

food boxes

At Paz De Cristo, we serve to empower each guest that we come across in order to help them become their best version of themselves. We do this by taking away things that are blocking them from becoming self-sufficient. We want our guests to feel respected. Accomplishing this goal takes more than money — it requires efforts from those in our community who are willing to volunteer their time. Donating money is just one way that you can help us improve the lives of our guests. Below you will read more about other things that you can do to make a difference.

Organize a Drive

Businesses, churches, classes, and community members can organize drives for toiletries, diapers, water, clothing, food, and more. These items are vital to bettering the lives of those in need in our community. A drive is a way for a dedicated group of individuals to make a change together, whether they be neighbors, classmates, co-workers, or friends. This shared experience is truly rewarding for everyone involved and beneficial to all those served at Paz de Cristo.

Serve Nightly Meals

Every night of the week Paz De Cristo serves hot, healthy meals to upwards of 200 guests. Groups can come in and participate in meal preparation, serving food and clean-up afterwards.  This is an impactful way to get involved and be more hands on in our mission. 

Volunteer with our Shower Program

Every Wednesday, Paz de Cristo offers our Shower Program from 8am -12pm. This is an opportunity for those in need to take a warm shower, and receive new clothing for a better today, Volunteers assist with intake, cleaning, and clothing distribution every week.

Distribute Food Boxes

Emergency food boxes are prepared in our warehouse and distributed to the public on the first, second and third Tuesday of every month. Volunteers are able to come in and help prepare and distribute emergency food boxes each week. Click here to learn more.  

If any of these seem like the right opportunity for you, we urge you to reach out to Paz De Cristo to learn more. Giving is just one of many ways that you can serve the community and be a part of the change that Paz De Cristo is making.

What Do Your Charitable Contributions Actually Finance?

Nearly $375 million is provided annually for charitable causes. Most of this measurement and tracking is provided by the IRS. The ability to do so is simple; people report their charity and charitable value and are then able to claim tax deductions. However, the more important takeaway from this information is the volume of wealth transfer that happens via charity to a variety of causes, ranging in everything from faith-based organizations like Paz de Cristo, which represents social justice and an opportunity to make one’s community safer and stronger, to vintage car collecting clubs or the Girl Scouts. The simple fact is, people’s generosity goes a long way to helping out organizations in the community that help a lot of other people.

The Big Question

The big issue on peoples minds, however, is knowing where their money goes when they give to charity. That, of course, depends on the charity and its organizational goals. Some use it to purchase goods and services that help deliver their function to targeted community audiences. Others use the funding for administrative support such as paying rent, providing office supplies, paying for vehicles and fuel to transport their program to different places, and others put the money received into outreach. Each organization is different, so it’s important for those providing charity to at least be aware of what a given group does before providing charitable funds.

Measure by Metrics

One of the most common metrics used to measure a charity’s efficiency tends to be the cost of their fundraising versus dollars going to other activities. On average, a good number of organizations tend to spend 25 percent on administration. That can be a significant diversion of funds people think will go towards direct help and instead is spent on infrastructure and compensating people in the organization. One of the key ways charities reduce such costs is the creation of a lot of volunteer opportunity positions that give the organization free labor. Using the same resources, a charity could keep overhead considerably low and drive more dollars towards programs through volunteering than with paid workers.

Not Every Group is a True Charity

Unfortunately, there are a lot of scams and more every year. Annually, whenever there is a big topic or interest, fake charities come out of the woodwork to capture the good intentions of people and divert their donations to personal pockets. Law enforcement goes after quite a few of these scams, but plenty more exist, including supposed faith-based supporters. There is no charity police that vets these groups before they get started, so it’s up to consumers to pay attention before giving a donation. This is why donors give to trusted organizations like Paz De Cristo, who have a long history in helping communities in tangible ways.

A Valid Example

Charitable Tax Credit provides donators to options for helping out both qualifying charitable organizations as well as helping support qualifying foster care charitable organizations. Both go a long way towards improving the communities they serve.

3 FAQs About Corporate Tax Credit Donations

Businesses might have seen some tax advantages occur with the tax law changes that took effect in 2018, but one particular area that was cut back significantly was business donations to charity. Regular small businesses such as sole proprietorships, partnerships and similar were stripped of the ability to effectively deduct charitable donations. However, traditional corporations and S corporations were not. These more advanced forms of business presence can still donate and enjoy a valuable tax benefit from doing so, even in 2021.

Are Deductible Donations Limited by New Rules?

Yes. For non-corporate businesses, the income is ultimately passed on to the individual owner and finally taxed on the personal income tax side. The recent tax changes narrowed deductions for charity donations to only those made by the individual and reported on personal income tax returns. Given the increase in the standard deduction, pursuing the charitable tax deduction as an individual only makes sense when itemizing deductions is worth more than the standard amount.

Can Corporations Still Give Directly for Deductions?

Yes! Corporations act as their own entity and pay taxes accordingly. In this regard, the corporation can take advantage of the charitable donation directly versus through its employees like above. For the S corporation, the contribution to a charity is capped at $250 if general. A higher amount has to be documented with a written confirmation of the charity, including a verified estimate of the goods or services provided. Further, the charity itself has to meet specific criteria, noted below.

For the corporation, a similar charitable contribution benefit exists as well, which also has to be documented accordingly per IRS rules.

How Do I Choose the Right Charity?

Regarding the charity receiving the funds from a corporation-type business, that organization has to meet what the IRS defines as “qualified.” This definition is often known as the 501c3 label associated with qualified charities and non-profits. Generally, it applies to recognized churches or non-profits that have formally applied to the IRS and been approved as a qualified charity.

Working poor charities are many, and a large number are qualified by the IRS, making them great candidates for corporate help. What they are able to pull in goes extremely far, benefiting large numbers in their communities. The funding typically goes primarily to programs, as many of the volunteer areas by such organizations are religious (34%), educational (26%), social services (14%) or health-oriented (7.3%). Paz de Cristo is a prime example, dedicated to boosting communities and social justice. By directing corporate help to Paz de Cristo, a company is achieving the dual benefits of helping faith-based supporters and making their community strong. Give today; it makes a huge difference.

Tax Credit vs. Deduction: What’s the Difference?

community service opportunity

Philanthropists like you often claim their donations as either deductions or tax credits, getting back a reward for their giving nature. It is essential to understand the differences between deductions and tax credits. Doing so will make it simpler for you to handle the challenges of this process and get the most reward for your donations.

What are Deductions?

Tax deductions are the most common way to cut back on your taxes and include various write-offs that you can use to minimize how much you owe. However, your deductions are not calculated using a 1-for-1 rate. That is to say, if your deductions are $12,000 or so, there are several formulas used to figure out how much this cuts out of your taxes – certainly not the total amount.

The different calculations used to figure out this amount are too complex to discuss in-depth in this article. However, they include various concepts created by the IRS and state tax officials to balance how much you owe with what you have spent. The idea is to create a fair understanding of how much these deductions impacted your taxes and give tax officials an excellent chance to collect decent money.

How Do Tax Credits Differ?

Tax credits are similar to deductions, as the “Working Poor Tax Credit,” an option that dates to 1998 and is now called the Qualifying Charitable Organizations tax credit. Like deductions, these credits are used to reduce the amount of money that you owe. However, tax credits usually reward people with a community service opportunity to give money to groups that qualify.

When deducted from your taxes, these credits are calculated on a 1-for-1 basis. So if you gave $2,500 in tax credits to a qualifying organization, you would get that much money off of your payment. However, this option is usually limited to pretty specific organizations, which are often changed and updated throughout various tax years to create the most accurate understanding of this process possible.

Getting the Most Out of Your Donations

If you want to give to various groups and would like benefits, tax credits are probably the best option. That said, deductions are also a good choice for the philanthropic. Of course, few true humanists give money just to get cashback on their taxes. However, your giving nature deserves a reward, and deductions and tax credits help make this process more rewarding.

To learn more about this topic, as well as how your donations help those suffering from hunger, poverty, and homelessness, call Paz de Cristo today. We’ll do everything we can to make it easier for you to help feed, clothe, and empower.

How Your Tax Credits Feed, Clothe, and Empower

food boxes

Everyone falls on hard times now and then, and it is our duty, as good citizens in the world, to help our brothers and sisters in their time of the greatest need. At Paz de Cristo, we help people who are struggling and who are in need of a helping hand. Most of those we provide service to deal with hunger, poverty, and homelessness. Our attention remains local, and we focus primarily on the Phoenix East Valley and immediate surrounding areas. The need is great, greater than many people realize. For example, did you know that nearly 30% of our neighbors live on a paycheck that barely covers rent and the necessities of life? Even the smallest gesture like a few dollars or food boxes or a place to stay for a few nights can make a world of difference in the life of someone who has lost almost everything.

A Passion for Helping

That is why we here at Paz de Cristo are committed to helping those less fortunate find the help and comfort and encouragement they need to get back on their feet and get their lives back on track. It all starts with compassion, support, love, food, shelter, clothes, and hope. Once the basic physical needs are met we can begin to tend to the mental and spiritual and emotional needs of those who come to use for help. We give people more than just a handout, we give them a hand up so that they can get back on their feet.

What We Do

Thousands of meals are prepared and served through Paz de Cristo, and it is all done through the help of our volunteers and generous donations from members of the community. Clean clothes, showers, haircuts and shaves are the first step to helping our guests feel better and helps give them a fresh start and helps them feel better about themselves and their future. At Paz de Cristo we also help people overcome obstacles in their path, so they can break the vicious cycle of homelessness and poverty and find work and become self-sufficient once again. Food boxes, basic living needs, and more can easily be provided so long as we continue to have the support of our community.

Those Who Make It All Possible

At Paz de Cristo, we rely on the help and support of donations and volunteers. Form working at our facility and assisting with our guests to helping to fund the work we do here in the community, we cannot do it alone. If you are looking for a way to help us make a bigger impact and touch more lives in the Phoenix East Valley area, consider taking advantage of the Arizona Charitable Tax Credit this year. Make a donation to our organization and enjoy the benefits of a tax break while also knowing you are making a difference in the lives of others right in your own community. Contact us today if you have any questions about what we do or how the Charitable Tax Credit works.

How to Identify a Qualifying Tax Deductible Charity for Your Donation

tax deductible charity

Eligible Arizona Tax Deductible Charities

Not every donation to a non-profit organization qualifies for a tax credit. The charities need to meet certain requirements set out by The State of Arizona and the federal government for your donation to count as a tax-deductible charity. The Arizona Department of Revenue publishes a list of all Qualifying Charitable Organizations and Qualifying Foster Charitable Organizations each year that you can contribute to.

The ADOR periodically recertifies the charities to ensure that they continue to meet the required legal requirements. Effective 2018, the Arizona Department of Revenue assigned five-digit code numbers to identify QCOs and QFCOs for tax credit purposes. Taxpayers have to use the “QFCO code” or “QCO code” in their Form 352 and 321, respectively, to claim their tax credit.

Eligibility for a Qualifying Charitable Organization

For an organization to qualify as a tax deductible charity, it must complete the QCO form and submit it to the ADOR alongside supporting documents. The non-profit needs to provide immediate basic needs to Arizonians. These include those that receive temporary assistance for needy family (TANF) benefits, low-income residents, or children with chronic illness or disability. The tax deductible charity also must spend at least 50% of its annual budget on “qualified services to qualified Arizonian residents.”

According to the Arizona Department of Revenue, qualifying services include cash assistance, shelter, food boxes, job placements, medical care, job training opportunities, or any other assistance that meets basic needs provided and used in the State. Low-income residents have a household income that is less than 150% of the federal poverty level. The State also indicates that chronically ill or physically disable individuals have a severe physical condition that requires ongoing medication or surgical intervention.

You can claim the tax credits on Form 321 for a maximum of $400 for single filers and $800 for married joint filers.

Eligibility for a Qualifying Foster Care Organization

A QFCO that qualifies as a tax deductible charity needs to meet the requirements of a QCOs. Additionally, the organization needs to spend at least 50% of its budget on ongoing services for at least 200 children placed in foster homes or on child welfare agencies. The State indicates that qualified individuals are foster children or people under 21 participating in a transitional independent living program.

You can claim your tax credit to QFCO on Form 352 for a maximum of $500 for single filers and $1000 for married joint filers.

Help Arizonians in Need at No Cost to You

Donations to a tax deductible charity can earn you tax credits on your State taxes and federal deductions. Paz de Cristo is a certified QCO in which 93 cents of every dollar donated goes to feed, clothe and empower. Your donation can make a difference in our community.

What You Need to Know About Tax Deductible Donations

tax deductible charities

Statistics indicate that three out of 10 of our neighbors survive on an income that barely covers rent and necessities. You can make a difference in people’s lives by donating to qualifying tax-deductible charities. Here are the top five things you need to know.

Arizona Tax Deductible Donations

Arizona Tax Credit provides dollar-for-dollar for charitable donations. Formerly known as Working Poor Tax Credit, it has a limit of $400 for individuals and heads of households. Married couples contributing to qualifying tax deductible charities can get a credit of $800.

You can make small contributions throughout the year to a food box or working poor charities. The sum of those contributions will be deducted at the end of the financial year as long as it is within the limits.

What Qualifies As a Donation?

There are several misconceptions about donations and tax credits. Many people tend to overlook that not all organizations that contribute to charity qualify as tax deductible charities. Nonprofits must register under section 501(c)(3).

It is also worth noting that not every nonprofit can qualify for either state or tax credit federal deductions. Organizations in sports and civic and social welfare are under the nonprofit section, but they are not eligible.

Charitable Gifts That Do Not Qualify

There are also certain types of gifts that do not qualify under charitable donations despite misconception. For example, if you were to organize fundraising for a friend, you will not be eligible for deductibles. It must be an organization registered as a nonprofit or one working under an umbrella organization.

Another issue with personal gifts is that they don’t qualify if they benefit you. Some examples may include the cost of books sold at a fundraiser or transport costs to an event. The price of the products you give to charity must also correspond to prevailing market rates.

The Issue of Earmarking

You cannot make tax credit federal deductions to an individual through a qualifying nonprofit. The donations given to a specific individual are considered to be gifts channeled through the organization. The principle of discretion stipulates that the charity must have the power to use the donation without the donor’s consent.

There are some limitations to the earmarking rule. The IRS may consider the intent of the organization when determining if the donation is deductible. For example, donating to a scholarship program qualifies and is not a case of earmarking.

Limits to Tax Deductible Donations

It is possible to qualify for tax deductibles if the worthy cause is outside the country. However, the nonprofit has to be registered in the United States.

You can also donate to crowdfunding causes as long as it is not an individual, a product, or a business. However, it is worth noting that promising to give something in the future does not amount to a donation. You can only get a credit for the contributions you make to tax deductible charities.

Before you can send your contributions, ensure that the organization is a nonprofit under section 501(c)(3). Keep your documentation in order, as you may need it when claiming credits for your donations.