(Update 1/18/23: Reposting for 2022/2023 taxes; let us know if there are similar programs – I believe Ohio has one now)
Reader Ana Acosta and some Reddit users let us know about a few tax credit opportunities for residents of Arizona. It can amount to at least $1,100 per person ($2,200 for a couple) which gets fully refunded on your tax return and thus costs you nothing – assuming you have a tax burden of at least that amount.
Overall it sounds like a possibility to do some good at now cost; plus, presumably you can donate with a credit card and rack up $1,100/$2,200 in free spend.
Note, you can donate until April and still count it for the prior year. Also note, these donations are apparently not deductible on the federal level since you are getting the money back on the state level.
- Donate $400 to a Qualifying Charitable Organizations (QCO)
- Donate $500 to a Qualifying Foster Care Charitable Organizations (QFCO)
- Donate $200 to a public school in this state for support of eligible activities, programs or purposes
- Someone mentions something about donations of about 2 x $1,000 to private schools as well, but I don’t have more info on that one
I’m not from Arizona and haven’t researched this thoroughly, but thought it worth a headsup about this opportunity for members of that state. Feel free to discuss further in the comments or to read further at the links above to find out more and verify. If anyone can add easy links of worthy places to make these donations that’ll be helpful to others as well.
Also let us know if there are similar programs from other states.
I live in AZ. This isn’t new, it’s been the law for at least five years. But yeah, it’s great to have a choice and send your “tax dollars” directly to an organization that you voluntarily support.
CPA here, in AZ. Careful. Remember that State Income Tax is federally tax deductible up to $10K SALT limit. If you lower your AZ tax burden, you lose the federal deduction if you itemize. In that situation you’re actually paying 22% (or your marginal rate) of the donation via increased Federal taxes
Isn’t the donation considered an itemized deduction for federal purposes and therefore, if one loses the state tax deduction, it’ll be compensated for with the increase in the donation reported as an itemized deduction?
If one doesn’t itemize, I think it won’t make sense to make the donation for the purpose of saving on taxes.
Well, lets see; to get stuck paying federal taxes on these refundable donations:
1. You have to itemize deductions
2. The combination of real estate taxes, other property taxes (both in any state) sales taxes or the balance of state income taxes (for all states) must be less than the $10K state and local tax limitation.
There is the $300 in federal charitable deductions allowed when not itemizing, but most people making the state tax refundable donations will have at least $300 in other cash charitable donations. In any case, the maximum impact for real cheapskates would be less than $100; and we’re talking about a maximum $2,200 credit.
You really have to go through a bunch of hoops to get stuck paying federal taxes on these refundable donations.
In any case, a credit is almost always better than a deduction.
The $300 deduction for non-itemizers was temporary (for 2020/21 only), its not there for 2022.
I don’t know AZ tax law that well or how it applies to itemized deductions. A payment was made both to the charity and to the state of Arizona. You got the money back once. I fail to see why there’s not a strong argument to write one or the other off. (Federal)
Fortunately, most people that can itemize get hit by the salt limit anyways, therefore that would make no difference for them anyways.
Wish there was a way for those who don’t have children to not have to pay school district taxes for all of those that do. I’m paying over $2k in school district taxes every year here in Florida and I don’t have children and their public schools are total crap. Only parents who send their kids to public schools should be paying these taxes IMO!
Bro, somebody had to pay for you when you was children, no? Instead of complaining throw in another grand voluntarily.
You don’t pay a school district tax. You pay a property tax which helps support vital infrastructure, libraries, school and medical services etc. It’s not really logical to claim that since you don’t have kids you shouldn’t have a portion of your property taxes go to support school funding. Education is vital in all our communities, not to mention it has an impact on property values. I’m sure there are services I don’t use in my local community, but I am fine with my property taxes going to support those services for the greater good of the community.
“You don’t pay a school district tax. You pay a property tax which helps support vital infrastructure…”
Depends. If you live in an area with a “unified” school district this is probably true. If you live in an area with an “independent” school district (eg Houston ISD) then the school district has separate taxing authority and sets its own millage rates.
This is a lopsided opinion of ‘I got mine, why should I pay for yours’. I don’t use the parks or the community center or library or shelter or food bank in my city. But I’d gladly pay because I’m grateful to be in a fortunate position. I’m delighted to see kids playing basketball or skateboarding at the parks, little girls practicing ballet or adults taking cooking classes at the community center, moms teaching their toddlers or teenagers prepping for exams at the libraries. I hope you grow a heart and some empathy.
So true! I shouldn’t have to pay for SNAP or any government assistance programs either as I haven’t used a dime of those. And all that hurricane relief shit, cut that. Ain’t no hurricanes in my state, let the Floridians pay if they want FEMA
Who paid for your schooling? Or did you skip that?
I don’t even have to ask who you voted for 🙂
2k? Try 20k in NY with 15k going to school taxes. My daughter is not even 2.
Wow, I love deals and consider myself frugal, but I hope I never fall to this level of selfishness for my own financial gain as to call for an end to the public services “I don’t use” thereby letting our society become [even] more dysfunctional than it already is.
Those “kids” are future teachers, doctors, engineers, innovators, etc. We’re all in this together, despite the “me, me, me” narrative that seems to pervade society. Desirable school districts raise property values, so it’s not as if you live there you don’t benefit from that. Whether or not your school districts are “crap” probably is more a function of your state’s administration, which seems to have its own opinions about science and history…
Florida ranks above average for education in the US.
Without the taxes of the folks without children, they’d be in the streets committing crime. You do receive some benefit for that money. Like the old saying goes “I understand how you feel”.
Oregon has two credits as far as I am aware:
There’s a $500 cultural art credits per person up to $1000 joint filer for certain cultural art organizations.
https://culturaltrust.org/get-involved/donate/
There’s also a $50 per person when donating to a political group.
https://oregon.public.law/statutes/ors_316.102
I’ve been using this tax provision to donate to the local school district. Great for the charitable organization, but I’m sure it also reduces the amount of $$ the state of AZ collects… I’m assuming they cover their losses by increasing sales tax, property tax, vehicle registration tax, etc. So I’m on the fence this year.
Pretty sure the Ohio version is a $50 max credit when you donate to a state-level politician, lol. I’d be happy to be wrong if they’ve expanded it though.
@Kris you are correct that Ohio has a $50 credit for state level politicians, but I don’t think this is what Chuck is referring to. I think he is talking about the Ohio $750 scholarship tax credit. But don’t let the name confuse you…this is nothing like the AZ credit in the initial post which has some merit. In Ohio, this tax credit is just another nefarious attempt by the Ohio state legislature to “encourage” religious-based teaching at the expense of public education. All on the Ohio taxpayers’ dime.
Why don’t they just give the money directly to the school and bypass the wacky tax credit nonsense?
Whether you think it’s good or bad, these programs are exactly what small-government Republicans want to have happen when it comes to social programs: funds go directly to organizations that people funding them choose, rather than being disbursed by the government.
And if a bunch of rich people in a rich school district give to their own district, their money stays local.
You want a society divided by income? Move to India.
You have never been to the Bay area lol
Hold on, is the US society not divided by income? Did I miss something?
For a lot of people I don’t think your complaint that “their money stays local” has the same negative connotation that it does for you.
I’m trying to phrase this all as objectively as possible. But too many people glance at programs like this and comment things like, “This is great, it’s all upside!” It is not, people should be aware that these programs are designed to take money out of general fund. Generally, conservatives should like it, liberals should not.
They ARE giving it directly to the school and get it back via tax credit, if I am not mistaken.
Absolutely. That’s my point: taxpayer sends money to schools directly, state government reimburses taxpayer, state government has that much less funds to work with. So if wealthy taxpayers collectively steer $10M to their local districts, there’s $10M funds less for the state to spread to all schools.
Good. Stop spreading money to garbage schools that don’t teach. Let parents support local education.
So, if you have $300 in charitable contributions, Arizona will offset your income taxes by $300. If I understand correctly, you can also claim the $300 deduction in federal income (New CARES act) as well, thereby reducing taxable income by $300. If you are in the 12% bracket, this could save you $36 in taxes. Does anyone see a flaw in this strategy?
Incorrect, I tried that strategy last year. However, federal cutoff was Decembaer 31st but fortunately state deadline was April 15th, therfore I was able to hold off on filing my taxes to make a second charitable contribution. In your case, a $700 qualifying donation should only cost you $264. And that’s assuming your AZ tax bill is $400+, if one owes <$400 in AZ taxes then remainder is nonrefundable.
The strategy that I recommend is this:
Make a $300 charitable contribution this month, next month enter your taxes into software without submitting or review with accountant, if you just owe $321 after entering your 1040 AGI on your 140 then make an additional qualifying donation for $321 to zero your AZ taxes or if you owe around $1K then donate $400 to QCO and $500 to QFCO and if you owe more then probably good to look into a school option, then lastly compete your tax filing.
FYI, while the $400/$800, $500/$1K, and $200/$400 contributions must go to human service organizations on the state’s eligibility lists, your federal $300 donation can go to any 501(c)3 nonprofit charity such as PetSmart Charities in Phoenix, AZ. Pets may not be human but they’re still people!
https://www.reuters.com/world/us/california-dogs-fill-shelters-pandemic-lockdowns-ease-2021-07-08/
https://petsmartcharities.org/get-involved
Sources: (1) https://www.azcentral.com/story/money/business/consumers/2018/08/31/federal-tax-credit-change-could-hurt-arizona-charities/1135192002/
(2) https://www.youtube.com/watch?v=lMSOTBYqEeM
(3) I personally tried this myself last year.
I read into this last year and I don’t believe you can double dip Federal deductions and State credits. Someone correct me if I’m wrong though
Edit: didn’t realize this comment was over a year old but still don’t think you can double dip
I do this every year by donating to my daughter’s schools. Quick easy credit card spend, plus benefits our school directly.
https://raeraeoflight.org/hike-for-hearts
Can donate up to $400 per person and $800 per household. Choose team Mikey though because that’s my son 🙂 thanks in advance to anyone that does it. And you don’t have to go on the hike just select virtual hiker if you aren’t interested in attending.
You should include the QCO code or QFCO code in your post because taxpayers must use the code to claim the tax credits on Form 321 and Form 352.