There are many people in Arizona who could do a lot of good for a lot of people, and it wouldn't cost them even a dollar. The State of Arizona offers tax credits in certain situations allowing some Arizonans to make contributions to schools and non-profit organizations, and then receive that money as a direct credit (not just a deduction) at the time income taxes are filed. In order to take advantage of the program, your donations (individuals, not businesses) must be received by the agency or school by December 31, 2009. Here are the basics.
Charitable Contributions Tax Credit
If you are donating to a charity, you have to itemize deductions on your Arizona return in order to get this tax credit.You can't just pick any non-profit organization. To qualify for this tax credit, a charity to which you would contribute must spend at least fifty percent of its budget on services to Arizona residents who receive Temporary Assistance for Needy Families benefits, to Arizona resident low-income households, or to chronically ill or physically disabled children who are residents of Arizona. You don't have to find that out for yourself; each charity knows if they qualify for the tax credit. Most of them will indicate this on their web site if they are. The organization may also have a form for this contribution or online payment system. You can often find the annual report online to take a look at how the money at that organization is spent. Even if the charity's web site doesn't have the information, you can call them to get it. The important issue here is that for you to receive the tax credit, the organization must be able to provide a copy of the certification letter from the Arizona Department of Revenue.
Once you know that the organization you support is certified, then you can make the contribution and take your Arizona tax credit when you file your tax return.
If you don't have time to check out all the individual organizations that might qualify, and you don't have a favorite qualifying charity in mind, there are umbrella organizations, like United Way, where you can donate the money and they will distribute it.
Read the complete and official information about the Arizona Department of Revenue Charitable Tax Credit.
School Tax Credit
If you don't itemize deductions on your income tax, you can still do good for others by contributing to education in Arizona through the School Tax Credit.You don't have to have a child in school, but you must have a tax liability for at least the amount of your donation. In other words, if you only owe $100, you can't get a $200 tax credit. The school also has to be qualified by the Arizona Department of Revenue. All Arizona public schools qualify, and there are some special schools that do, too. If you don't owe Arizona taxes this year, but you feel you will in the next few years, you may carry forward your school tax credit for up to five consecutive taxable years.
These monies are not used to fund regular school activities. The donations you make can only be used for extra curricular activities, like sports programs, field trips, after school tutoring programs, after school arts programs, etc. You are allowed to specify which programs you'd like your donation to support.
Read the complete and official information about the Arizona Department of Revenue School Tax Credit.
How I Make My Decision on the Arizona Tax Credit
This year I'll be contributing to a school and receiving the tax credit. There's a somewhat unusual consequence associated with the school tax credit: it is likely that in those districts where families have higher incomes, schools might receive more donations than the ones where the families have lower incomes. That's because even though it's a tax credit, you must advance the money before you receive it back in the form of a tax credit.
There's nothing wrong with contributing to your own child's school, but I decided to do it a little differently. I did some research about schools where the kids might be in more need of after school programs and opportunities. I found an elementary school where the kids were trying hard, but not quite achieving the educational requirements of the state, where the drop out rate was not bad, where basically 100% of the kids qualified under the subsidized lunch program in a low income area. I feel very good about my decision.
Warning: Schools and school districts are often closed between Christmas and New Year's. You should verify how mail received during that time will be treated to ensure that they will issue a receipt to you dated no later than December 31, 2009.
Your criteria for selecting a school is a matter of personal choice. Here are some resources for researching schools.
How To Tell How a School is Doing
Arizona School Report Cards
How To Tell How Many Kids in a School Qualified for Reduced Price or Free Lunches
School Lunch Report
Important Disclaimer: I am not a tax adviser or an accountant. I do not represent the Arizona Department of Revenue or the Arizona Department of Education. Please consult your own tax advisers regarding Arizona tax credits.
All tax information mentioned herein is subject to change without notice.
