Is this a tax deduction or tax credit?
If you have an Arizona tax liability – this is tax credit.
For example, if you have a $4,000.00 Arizona tax liability over the course of the year, and you donate $2,100.00, you would now only have a $1,900.00 tax liability. Or if you are getting a refund, you now get $2,100.00 more in a refund.
Your donation may also be eligible to be taken as a tax deduction off of your federal taxes.
If you live outside the state and thus don’t have a tax liability, your donation can be a tax deduction off of your federal taxes. Arizona Tuition Connection is a 501(c)3 non profit organization.
Can I direct who gets my tax dollars?
The state tax credit law allows donors to recommend a student or school for a tuition scholarship. We place a high priority on these recommendations and will follow the intentions of the donors to the full extent the law will allow.
State law requires that certain amounts from each donation be used for different types of scholarships. It is important to understand that not every student is eligible to receive every type of scholarship available.
By state law a School Tuition Organization cannot award, restrict or reserve scholarships solely on the basis of a donor’s recommendation. A tax payer may not claim a tax credit if the taxpayer agrees to swap donations with another taxpayer to benefit either taxpayers own dependent.
Please contact us if you have any questions on this.
The short answer is:
For the tax year 2018, you can donate any amount up to $2,213 as a married couple filing jointly or $1,107 as a single filer. You will receive a dollar-for-dollar state tax credit for your donation off of your Arizona state tax liability.
If you have no Arizona income tax liability, you have nothing to take the credit against.
The longer answer is:
Although you only make one donation, Arizona state law requires us to break out your donation into two groups – Original tax credit and a Switcher tax credit. Each of these can be used for different scholarship purposes and must be tracked separately in our records.
This may sound more complicated than it is. Simply put, by law you must first donate the maximum for the original tax credit, any additional funds you donate will go to the Switcher tax credit.
We must break out your donation the following way for the tax year 2018:
This primarily is something we need to track on our end, but we will break this all out for you on the receipt we send you for your taxes.
So a donation by a married couple of $2,177.00 would have a receipt says $1,092.00 for Original scholarships and $1,085.00 for switcher scholarships. This, again, is because the first $1,092.00 of the donation must go to Original and anything above that amount must go to Switcher.
By what date do I need to donate?
For the 2018 Arizona tax credit, donations can be accepted through April 15th, 2019.
For federal tax purposes, any deduction must be claimed for the tax year in which the donation was made. So for the 2018 tax year, the donation would need to be made before January 1, 2019 to be used as a deduction off of your federal taxes. Note: The tax laws have changed for 2018, so make certain you consult with your tax professional to confirm you can take it as a federal tax deduction.
How Do I Report A Donation On My Taxes?
The easy answer for anyone who uses a tax preparation service is that all tax preparers’ and even the software systems are all set up for this type of tax credit.
If you do your own taxes without the use of a software package, donations to Arizona Tuition Connection for the Original tax credit are filed using Arizona Form 323.
Donations made for the Switcher tax credit are filed using Arizona Form 348.
A donation receipt will be sent for your tax records.
Can I donate to my own Children?
No, the law states you can not donate to your own household.
Can Parents Donate To Each Other’s Children?
No. Whether intentional or not, this is called “swapping”. The law states, “A taxpayer may not claim a tax credit if the taxpayer agrees to swap donations with another taxpayer to benefit either taxpayer’s own dependent.”
In addition, parents cannot donate and recommend their own children.
Must I fill out a donation form?
Yes, state law requires that we collect a minimum amount of information with each donation.
My employer matches donations to Non Profits, will this qualify for a match?
The rules for what can and can’t be matched are established by your employer, but it is rare to see an employer not consider this a qualified donation.
For you to take it as a tax credit it is important that you do the initial donation correctly. According to Arizona state law, the original donation must be made directly to Arizona Tuition Connection or through an employer with holding, with the employer paying the withholdings directly to us.
You cannot make your original donation through United Way, Benevity or a similar “umbrella” organization and take it as a tax credit. While we can certainly accept such donations, the donors are not entitled to take the private school tuition organization credit. The law states that the donor must make the contribution directly to a school tuition organization.
What you must do is make your donation directly to Arizona Tuition Connection, or through payroll deduction, then take the receipt we provide to the third party or your employer for matching. By doing it this way you can take the credit and have your employer match.
Typically, your employer will send us some paperwork to complete and return. These matching funds can sometimes take a while to be sent. It is not uncommon for employers to cut matching checks, quarterly or even semi-annually.
Can people outside of Arizona make donations?
This is an Arizona tax credit program. To be able to take the donation as a dollar-for-dollar tax credit the donor must have an Arizona tax liability and be filing an Arizona tax return. People with no income in Arizona don’t file Arizona taxes and therefore don’t have any liability to take the credit against.
With that said, Arizona Tuition Connection is a 501(c)3 non-profit organization. If people out of state would like to support your family they can make a donation. Instead of being a dollar for dollar tax credit these out of state donations are taken as a federal tax deduction. Donors claim it on their federal tax forms just like they do every other charitable donation they make.
Non-tax credit donations are not limited to the maximums set by the state for tax credit donations.