If you think you are too late to donate money and avoid paying Arizona the income tax they say you owe, I have some good news and some bad news –
first the bad news: you are wrong
now the good news: if you want to donate to a School Tuition Organization you have until April 15th to do so and still get the Arizona income tax credit. You won’t be able to deduct it from your Federal taxes until NEXT tax year, but in this instance, Arizona is a bit more lenient than the IRS when it comes to reducing your tax bill.
If you’d rather give to charities that help the working poor, extracurricular activities in public schools or that help foster children you will need to mail or charge your donation by 12/31 to use it for an Arizona income tax credit in the current tax year – and even though the money has not been removed from your checking account or you have not yet paid the charge on your credit card as of 1/1, you can still take the deduction.
There is one more thing you need to consider before writing that check or pulling out that credit card though: these income tax credits are not refundable. To explain: if you owe taxes on your Arizona income tax return you can reduce what you owe, on a dollar for dollar basis, with these credits – only up to the amount you owe. If you are getting a refund you will not increase your refund with these credits. You can carry them forward for the next 5 years, but unless you owe money on your Arizona income tax return, you will not get any benefit from these donations – well, except for the federal income tax deduction and the ‘feel good’ aspect of giving to a charity, of course.
To take the donation deduction on your federal income tax return you need to donate by 12/31 (today) and you will need to use the federal schedule A to itemize deductions rather than the standard deduction. Here again, Arizona is more lenient in this regard, as you do not have to itemize to get these tax credits. This is of particular interest to those who rent (or live with friends or relatives) or whose homes are paid off or paid down enough that their home interest payments aren’t large enough to make it worthwhile to itemize on the federal return.
For help with planning to take advantage of these credits next year, come in and see us – we are open 5 days a week from April 16th through December 31, and 6 days a week during tax season. To get the maximum advantage from these income tax credits this year, bring all your tax information to us – we want to help you!
REMEMBER: nobody can make taxes fun – but we make them less taxing!!