Aug 25, 2014
How Donations Work: Part 4
Claiming Your Credit
Once you've donated you will still need to claim the credit on your Arizona income tax forms. We send receipts weekly throughout the year except in December and January, and send comprehensive annual statements by January 31. Call us if you need your receipt sooner.
Below are the Arizona Forms you will need to include with your Arizona Form 140 (140, 140NR, or 140PY). You cannot use the short form (140A) or 140EZ if you are claiming a private school tax credit. We update the tax forms as they become available by the Arizona Department of Revenue. You can visit the AZDOR Tax Credits & Exemptions website (for tax credit forms) or the AZDOR Individual Forms website (for your 140 Forms) for more information about the forms you use to file your taxes.
As always, we recommend you consult with your tax adviser regarding your specific situation. Other credits, deductions, and various factors may also apply
and would affect the end result.
The donation deadline for a given tax year is no longer December 31 for private school tax credit donations. Donations can be mailed or submitted online to ACSTO prior to filing taxes but no later than April 15 and still be eligible for the tax credit for the previous tax year. This means that for any donations made between January 1 and April 15 it is up to the donor to determine which tax year to claim the donation. It must be postmarked or submitted online by midnight of April 15 - there are no extensions!
This is convenient, because you can have all your paperwork handy for your taxes, calculate the exact amount of income taxes incurred during the previous year, and know exactly how much you can donate and claim as a tax credit.
For those of you who donate between January 1 and April 15, just know that the deadline for charitable donations for Federal deduction purposes is still December 31, so you won't be able to claim that until next year's tax returns.
In this instance, the federal adjusted gross income that you use on your Arizona return may not be the same as the federal adjusted gross income from your federal tax return. Also, the federal Schedule A deductions used on the Arizona return may be different from the federal Schedule A deductions taken on your federal return. See the azdor.gov website for more information or read the Arizona 140 Schedule A Instructions below regarding line 13.
Claiming Your ACSTO Donation
We created the following video to show you the basics of how our receipts, and the ADOR's tax forms work. Our video will help make claiming your credit less confusing! After watching the video, if you still have questions, continue to read on, or give us a call at our office!
Determining Your Credit
If you are trying to maximize your donation, ACSTO recommends that you donate as close to your expected liability for the year as possible.* How much you pre-paid in taxes out of your paycheck throughout the year is irrelevant to the credit you are able to receive (though it IS relevant to what your potential refund could be.)
This is because your credit is always limited to the maximums allowed, your liability, or the actual amount you donated, whichever is least; it is NOT based on how much you pre-paid in taxes or your expected refund.
*You can determine an approximate liability by looking at last year's taxes, or you can calculate your exact liability in January-April and still make a donation for the previous tax year because of the April 15 relate-back.
Determining Your Refund
More than anything else, your refund will be determined by how much you overpaid to the state throughout the year.
So if you are trying to determine whether you will receive a refund in a given year, first you must determine how much you will pre-pay (or have already pre-paid) in taxes for that year.
This is because a refund is only possible if the sum of your pre-paid taxes and your donation is more than your liability, but only up to how much you had pre-paid in taxes to the state.
Most people who donate end up with some form of refund since they pre-pay in taxes out of their paycheck throughout the year and then also make a tax credit donation, and so they double-paid on their taxes (in a sense). So a tax credit does not necessarily guarantee a refund, but it usually causes people to end up with a refund.
If you donate via Withholdings, you will not likely receive a refund, since your paycheck withholdings are going straight to ACSTO instead of being pre-paid to the state.
Determining Your Deduction
Your donation may count as a charitable donation for Federal deduction purposes. Consult your tax adviser for eligibility requirements. But on the state side, you cannot claim both a state deduction and a state tax credit for the same donation. The tax year deadline for those wanting to claim their donation as a Federal deduction is still December 31 (the April 15 relate-back does not apply for deduction purposes, only for the state tax credit).
Donating to Multiple Tax Credits
Different types of Arizona individual income tax credits can stack. You can combine any of the different tax credits on top of each other to receive more of a tax credit on your Arizona income taxes, so long as you have that much liability to claim.
For 2014, it seems that a married couple filing jointly can claim upwards to $3,306 in dollar-for-dollar tax credits for donations to qualifying sources. That is amazing! Just remember that ACSTO only deals with the individual private school tax credits; we cannot accept donations for any other type of tax credit.
If you donate to multiple tax credits, remember that the sum of the tax credits you are able to claim in a given year is never able to be higher than your actual liability for that year. If your donations to multiple tax credits total higher than your liability, you are able to claim the excess in future years under those tax credits (within five consecutive years), but what you are able to claim in future years is limited to the total of the maximums allowed in the current year. Everything in excess of those maximums cannot be claimed back in any year, and simply count as a charitable gift instead of a tax credit donation.
Tax Credit Examples
You generally do not want to donate in excess of your liability and/or the maximums in any given year unless you don't mind waiting longer to claim the extra or possibly skipping out entirely on a tax credit for the overage.