Wednesday, October 26, 2016

As we draw closer to the end of 2016, the question of tax planning takes on a greater importance for many taxpayers.  For residents of the State of Arizona, the various tax credit donation options have always seemed to be a great way to reduce their tax liability while doing good for the community.

For those taxpayers who are not familiar with these tax credit donations or how they apply to your individual income taxes, here is a very quick and brief explanation.  The State of Arizona allows taxpayers to make donations to a variety of organizations, for several different purposes and, instead of deducting the donation as an itemized deduction on the Arizona return, take a dollar for dollar tax credit (a direct reduction of the tax liability).  By taking advantage of these tax credits, the taxpayer can reduce their total Arizona tax obligation to zero and receive a refund of all the Arizona taxes that have been paid for the year, through withholding or estimated tax payments.  The amount of reduction is limited to the amount of the total tax obligation or the limits on the donations, whichever is lower.

Here is the good news, Arizona Governor Doug Ducey signed both SB 1216 and SB 1217 into law earlier this year.  These new laws both increase the amount that taxpayers may donate under some of the credits and extend the due date for the donations to be claimed as a credit on the Arizona return. The following is a recap of these credits, the due date and the maximum amount.

                                       Single/Head of        Married Filing
Credit Type                    Household Cap            Joint Cap             Due Date for 2016 Donations

Qualified Charitable
  Organization                    $400.00                   $800.00                  April 15, 2017

Foster Care Charitable
  Organization                    $500.00                $1,000.00                 April 15, 2017

Public School Tax
  Credit                               $200.00                   $400.00                 April 15, 2017

Private School Tuition
  Tax Credit and overflow  $1,087.00             $2,173.00                 April 15, 2017
        Regular (Form 323)    $545.00               $1,090.00
        Overflow (Form 348) $542.00               $1,083.00

Military Family Relief
  Fund Tax Credit                $200.00                  $400.00                 December 31, 2016
  (This donation is limited to a
    total aggregate amount of
    $1,000,000.  This means that
    once a total of $1,000,000
    has been donated for the year,
    the credit is no longer available
    for any taxpayer).

This can be a somewhat confusing system, so I urge you to give me a call to discuss the impact they may have on your income tax returns for 2016.

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