An individual income tax credit is available for contributions to Qualifying Charitable Organizations that provide assistance to low income residents of Arizona. For a list of all qualifying organizations, click here .
Taxpayers filing as "single" and "head of household" status may claim a maximum credit of $400. (Taxpayers filing as "married filing separate" also may claim a maximum credit of $400.) Taxpayers that file as "married filing joint" may claim a maximum credit of $800. This donation does NOT conflict with private or public school tax credit donations. Arizona taxpayers may take both tax credits.
Beginning with the 2016 tax year, credit eligible contributions made on or before the 15th day of the fourth month following the close of the taxable year, may be applied to either the current or the preceding taxable year and are considered to have been made on the last day of that taxable year.
Below is a comparison example to explain the difference.
Sally earned $50,000 this year and owes $1700 in taxes. Sally donated $700 to ABC Local Charity. Although ABC Local Charity is a nonprofit 501(c)3, it does not qualify for the Tax Credit. Sally can claim a deduction for her gift, which reduces her taxable income by $700. Sally's annual tax liability is now based on $49,300, and she will pay $1590 in tax.
Dick and Jane earned $50,000 this year and they owe $1700 in taxes. They gave a $700 gift to NCDP. NCDP is both a nonprofit 501(c)3, and also a Qualifying Charitable Organization for the tax credit. Dick and Jane now receive a tax credit for their gift, which reduces their tax owing by $700. Their annual tax liability is now $1000. Have fun with Dick and Jane!
Another way to look at it: with the tax credit you can decide where your tax dollars are spent.
In the first example, not only are your taxes not significantly reduced after your donation, but very few of your tax dollars went to your desired charity. A lot of your own money went to the local charity, but not much from your tax dollars.
However, with the Tax Credit, 100% of the tax credit was removed from your taxes and given directly to your local, personally-selected charity. In effect, you didn't donate a penny to NCDP - you directed the government to make the donation using your tax dollars.