The following guide is to help you navigate the 2021 Arizona tax credits for charitable donations. Donations are no longer eligible for a federal charitable deduction if you receive a credit for Arizona purposes. The donations are eligible as a deduction on your Federal Schedule A as a state tax payment if you have not yet exceeded the $10,000 State and Local tax (SALT) limitation. You still receive a dollar-for-dollar tax credit for Arizona purposes. It’s a great way to dictate where your tax money goes even if you are not eligible for a federal benefit.
Qualifying Charitable Organizations (QCO) Credit
Credit for cash contributions made to certain charities
- Maximum credit for the 2021 tax return:
- $400 for single, heads of household, and married filing separate filers
- $800 for married taxpayers filing a joint return
- Credit can offset Arizona tax liability dollar for dollar but is not refundable
- Unused credit can be carried forward 5 years
- Qualifying charitable organizations for 2021: https://azdor.gov/sites/default/files/CREDITS_2021_qco.pdf
- Contributions can be made from January 1 to April 15 of the following calendar year
Qualifying Foster Care Charitable Organizations (QFC0) Credit
Credit for cash contributions made to certain foster care charities
- Maximum credit for the 2021 tax return:
- $500 for single, heads of household, and married filing separate filers
- $1,000 for married taxpayers filing a joint return
- Credit can offset Arizona tax liability dollar for dollar but is not refundable
- Unused credit can be carried forward 5 years
- Qualifying foster care charitable organizations for 2021: https://azdor.gov/sites/default/files/CREDITS_2021_qfco.pdf
- Contributions can be made from January 1 to April 15 of the following calendar year
Public Schools Credit
Credit for cash donations made or fees contributed to public schools for extracurricular activities or character education programs
- Maximum credit for the 2021 tax return:
- $200 for single, heads of household, and married filing separate filers
- $400 for married taxpayers filing a joint return
- Credit can offset Arizona tax liability dollar for dollar but is not refundable
- Unused credit can be carried forward 5 years
- Qualifying public and charter schools for 2021: https://azdor.gov/sites/default/files/media/PUBLICATION_ADESchoolListing.pdf
- Contributions can be made from January 1 to April 15 of the following calendar year
Certified School Tuition Organizations (STO) Credit
There are two credits available for contributions made to Certified School Tuition Organizations:
1) Original Individual Tax Credit
Credit for cash donations made to a Certified School Tuition program for scholarships to qualified private schools
- Maximum credit for the 2021 tax return:
- $611 for single, heads of household, and married filing separate filers
- $1,221 for married taxpayers filing a joint return
- Credit can offset Arizona tax liability dollar for dollar but is not refundable
- Unused credit can be carried forward 5 years
- School Tuition Organizations certified to receive donations: https://azdor.gov/sites/default/files/REPORTS_sto-i-list.pdf
- Contributions can be made from January 1 to April 15 of the following calendar year
2) Switcher Individual Tax Credit
Credit for cash donations made to a Certified School Tuition Organization for scholarships to qualified private schools
- Maximum credit for the 2021 tax return:
- $608 for single, heads of household, and married filing separate filers
- $1,214 for married taxpayers filing a joint return
- Credit can offset Arizona tax liability dollar for dollar but is not refundable
- Unused credit can be carried forward 5 years
- Credit can only be taken if the individual taxpayers donate the maximum amount to the first credit
- School Tuition Organizations certified to receive donations:
https://azdor.gov/sites/default/files/REPORTS_sto-i-list.pdf
- Contributions can be made from January 1 to April 15 of the following calendar year
For further information on both the Public Schools and the Certified School Tuition Organizations credits, please see Publication 707: https://azdor.gov/sites/default/files/media/PUBLICATION_707.pdf
Military Family Relief Fund (Credit)
The 2021 Military Family Relief Fund is now closed for online donations. A short window remains for mailed-in check donations. Verify the $1 million dollar cap has not been reached before donating for Arizona state tax credit purposes.
- Credit for cash donations to provide financial assistance to the families of currently deployed Service Members and post-9/11 Military and Veteran families for hardships caused by the service member’s deployment to a combat zone
- Maximum credit for the 2020 tax return:
- $200 for single, heads of household, and married filing separate filers
- $400 for married taxpayers filing a joint return
- Credit can offset Arizona tax liability dollar for dollar but is not refundable
- Unused credit cannot be carried forward
- Contributions can be made from January 1 to December 31 of each calendar year, as long as the cap has not been met
- Credit capped at $1,000,000 annually
- Available on first come first serve basis per date of donation
- Visit this link to see how much has been contributed to date: https://dvs.az.gov/mfrf
WARNING
- If you contribute for a prior tax year, make sure you are working off the current calendar year’s organization list.
- Contributions to QCOs and QFCOs | Arizona Department of Revenue (azdor.gov)
- For example: If you make a contribution in January of 2022 for purposes of your 2021 Arizona tax return, you need to be sure the charitable organization to which you are donating is on the 2022 eligible organization list.
The 2022 list of eligible organizations is available at the Arizona Department of Revenue website. The list of eligible organizations will be updated periodically throughout the year as eligible organizations receive their authorization to receive donations under the QCO and QFCO program.
It is possible for an organization to be certified one year and not the next, so it is critical that you verify the organization is certified to receive tax credit donations at the time you donate. It is also possible for a switch from a QCO to a QFCO, or vice versa.
DISCLOSURE: For complete information on your tax situation, you should consult a qualified tax advisor. While Versant Capital Management doesn’t offer tax advice, we are familiar with certain tax situations that our clients face regularly. Disclosure: Any tax-related material contained within this document is subject to the following disclaimer required pursuant to IRS Circular 230: Any tax information contained in this communication (including any attachments) is not intended to be used and cannot be used for purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting marketing or recommending to another person any tax-related matter.
