For Individual Taxpayers
For almost 30 years, Arizona’s Private School Tuition Tax Credit Program has allowed Arizona taxpayers to give to non-profit organizations called School Tuition Organizations (STOs). The taxpayer then receives a dollar-for-dollar tax credit when they file their state taxes.
A tax credit is different than a typical charitable contribution. Rather than just reduce your taxable income, a tax credit directly reduces your state tax liability!
Mr. and Mrs. Jones have an Arizona tax liability of $1,500. They choose to make a $1,000 donation to an Arizona STO. This means that now their tax liability (the amount they owe to the state) is only $500.
STOs then use these donations to provide tuition scholarships to children across Arizona.
When Can I Donate?
You may donate at any time of the year, but for donations made between January 1 and April 15, the donor can choose to claim the tax credit for the previous or current tax year. If claiming it for the previous tax year, donations must be made by the time you file your taxes or April 15, whichever comes first.
How Much Can I Donate?
There are two programs for individual taxpayers. You can donate up to the combined maximum of the Original and Overflow Tax Credits OR your Arizona state tax liability, whichever is less.
For 2020, a married couple filing jointly can claim a maximum credit of up to $2,365, a single taxpayer can claim up to $1,183
How Much of My Donation Goes to Scholarships?
By law, at least 90% of tax credit donations MUST be used for scholarships. And unlike other tax credit programs, STOs submit detailed annual reports to the Arizona Department of Revenue each year.
How Do I Report the Donation on My Tax Return?
Donations for Original Tax Credit are filed using Arizona Form 323. Donations made for the Overflow Tax Credit are filed using Arizona Form 348. If claiming any tax credits, you will also need to complete Form 301. Forms are available from the Arizona Department of Revenue at azdor.gov.
If I Give to This Program, Can I Still Participate in Other Tax Credit Opportunities?
YES! Arizona has other tax credit opportunities including the public school extra-curricular and the charitable and foster care organization tax credit.
Since 2006, Arizona’s Corporate Tax Credit Programs have given Arizona businesses a similar opportunity!
Who Can Give?
Arizona businesses eligible to receive a dollar-for-dollar tax credit:
- S-Corps & LLCs that file as an S-Corp
- Insurance Companies that pay premium taxes in Arizona
Two Corporate Tax Credit Scholarship Programs:
- Low-Income Corporate Tax Credit Program
Disabled/Displaced Corporate Tax Credit Program
Where Does the Money Go?
Arizona’s corporate tax credit programs help children with special needs, children who are in foster care and children living in low-income families.
How Much Can a Business Give?
Up to the corporation’s TOTAL tax liability for the current year, however total donations overall can’t exceed the program CAP. For 2020, the current CAP on the Low-Income Corporate program is $123,042,188 and $5,000,000 on the Disabled/Displaced program. The program can accept donations starting each July and until the CAP is exhausted.
But it must be complicated, right?
Not at all! Simply determine the corporation’s tax liability for the year, decide how much you would like to give and then contact an STO. They’ll take it from there!