With less than three months until the end of the year, it is time to start thinking about strategic moves you can make to optimize your tax filing for 2020, especially regarding charitable giving. Here is a primer for Arizona residents and taxpayers.
Arizona taxpayers may subtract from the income taxes they owe, dollar for dollar, donations made for certain limited purposes. Arizona recognizes the following tax credits.
Charitable organization credit: Qualifying charitable organizations provide basic needs to Arizona residents who receive Temporary Assistance for Needy Families benefits, are low income residents or have a chronic illness or physical disability. Taxpayers may claim $800 (for a married couple filing jointly) or $400 (for a single filer). The tax credit is claimed on Form 321.
Public school tax credit: Taxpayers may claim a nonrefundable tax credit for contributions to Arizona public schools. The maximum credit is $400 (married) and $200 (single). The Department of Revenue requires taxpayers to report the school’s county code, type code and district code and site number on Form 322.
Student tuition organization/private school credit: STOs receive income tax credit contributions to fund scholarships for students to attend qualified private Arizona schools. Taxpayers are allowed a credit of $1,186 (married) or $593 (single). Taxpayers may claim this credit on Form 323. If you choose to donate the maximum amount on Form 323, you can make an additional donation that allows a credit of $1,179 (married) or $590 (single). The total credit allowable for contributing to STO for 2020 is $2,365 (married) or $1,183 (single)
Foster child credit: Foster care charitable organizations provide immediate basic needs for at least 200 individuals in the foster care system. Taxpayers are allowed a $1,000 credit (married) or $500 (single). Taxpayers may claim this credit on Form 352.
Military relief fund credit: Taxpayers can claim $400 (married) or $200 (single) for donations made to the Military Family Relief Fund, which is administered by the Arizona Department of Veterans’ Services. Taxpayers may claim this credit on Form 340.
Taxpayers can claim a tax credit for all of the credits in the same year to the extent of their Arizona tax liability meaning credits are not refundable and any unused credits carry forward. Therefore, you can reduce your state liability dollar for dollar by $4,965 (married) and $2,483 (single) from your income taxes for 2020. The due date to make these credits is not until April 15, 2021, so you can plan on making them right before you file your return.
Taxpayers can elect to do itemized deductions. Arizona Taxpayers can claim itemized deduction on an Arizona return even if they take the standard deduction on a federal return. Itemized deductions are claimed on Form 1040, Schedule A. Charitable donation deductions can be itemized in an amount of up to 50% of adjusted gross income for cash donations and 30% for property donations. JN
Jeff Chirico is the co-managing partner of CK CPA Services, LLC. Allison L. Kierman is the managing partner of Kierman Law, PLC.