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It’s easy to make the holidays and the New Year brighter for families impacted by COVID-19.
Did you know that there are actually three separate tax benefits that you may qualify for? We have made it simple by detailing these tax benefits below.
Please keep in mind, that we are providing general tax benefit knowledge, not official tax advice. Everyone’s situation and state and federal liabilities are unique, so please consult with your tax professional for specific insights and to ensure you meet the individual benefit qualifications.
The Arizona Charitable Tax Credit provides a dollar for dollar tax credit when there is an Arizona State Tax liability. Individuals may receive up to a $400 Arizona state tax credit, and couples filing jointly may receive an Arizona state tax credit of up to $800. There is no need to itemize deductions to claim a credit.
There is a 25% deduction available to non-itemizers to leverage. Donors are eligible to take this deduction on any dollars donated BEYOND the donation to the Arizona Charitable Tax Credit. For example: if someone gives $400 to United Way and leverages the Arizona Charitable Tax Credit, but they would like to actually donate $1,000—they are eligible to take a 25% deduction off the additional $600 donation. The 25% deduction is applied to their income and within their individual tax bracket.
A NEW Federal CARES Act deduction is available for donations made to any 501(c)(3) organization and it allows a limited charitable deduction for taxpayers claiming the standard deduction who do not itemize. For example, if you take the standard deduction and give $300 to charity, you will get a $300 federal tax deduction in addition to the standard deduction. This additional deduction is available to you, even if you have already taken advantage of other tax benefits.
For donors who do itemize deductions, the CARES Act also allows you to take a tax deduction of up to 100% of your Adjusted Gross Income (AGI) for contributions to qualifying charities in 2020. This new law temporarily lifts the limits on charitable giving from 60% of a taxpayer’s AGI to 100% for 2020.
Tax credits provide a dollar-for-dollar reduction of your income tax liability. Tax deductions lower your taxable income and are equal to a percentage of your marginal tax bracket. You cannot claim both a deduction and a credit for the same charitable contribution on your Arizona return.
Giving through the tax credit is like “telling your tax dollars where to go.” You reduce your state tax liability, while at the same time investing in your community through an organization you trust.
Now, more than ever, families continue to be impacted by COVID-19. The Arizona Charitable Tax Credit helps support those who need our support. Donations help us to quickly respond to increasing and emerging needs throughout our community.
You can make a donation and claim an Arizona state tax credit for 2020 through Tax Day on April 15, 2021.
No, not every nonprofit or charity is considered a Qualifying Charitable Organization, according to the Arizona Department of Revenue. To qualify, the guidelines state that the organization must spend at least 50% of its budget to “provide immediate basic needs to residents of Arizona who receive temporary assistance for needy families (TANF) benefits, are low-income residents of Arizona, or are children who have a chronic illness or physical disability.” An Umbrella Charitable Organization is a charitable organization that collects cash contributions on behalf of charities, or through a fund, and directs those contributions to a qualifying charity that is certified by the department.
Valley of the Sun United Way qualifies as an Umbrella Charitable Organization through its Arizona Charitable Tax Credit designation. Donations help support our community with funds going to Qualifying Charitable Organizations that are certified by the Arizona Department of Revenue, which provide immediate basic needs services such as medical care, childcare, food, clothing, shelter, job training, and job placement services.
You can utilize multiple state tax credits. In addition to donating to a Qualifying Charitable Organization or Umbrella Charitable Organization, such as United Way, you can receive a credit for also giving to:
All of them are separate, so you are able to donate to your school and your favorite qualifying nonprofit, and you’d receive both credits.
You’ll need to fill out Form 321, which you can download from the Arizona Department of Revenue website. The form will ask you for a five-digit QCO code to signify which organization you supported. You can look up the QCO code online or contact the organization to get that information.
The QCO code for donations made to Valley of the Sun United Way’s Arizona Charitable Tax Credit is 20726.
If you have questions about the Arizona Charitable Tax Credit, or the other tax benefits covered here, feel free to contact us at information@vsuw.org. To donate, and take advantage of the Arizona Charitable Tax Credit or other tax benefits, please click below.
