Remember you have until 4-15-18 to make your tax contribution for 2017

How does the Arizona Tax Credit Work?

Contribute to the McKenna Youth Foundation and receive a dollar for dollar return. Here is how it works!

The Arizona State Tax Credit program allows you to make a donation to the McKenna Youth Foundation (Qualifying Charity Organization)as well as other types of Arizona tax credits (Military, Foster, Public and Private Schools)and receive a dollar-for-dollar credit against Arizona state taxes owed. This donation counts as a charitable contributions and may be deducted on your federal return if you itemize your deductions.

Donating to tax credit eligible organizations will most likely leave you in a tax neutral situation – meaning you’ll pay about the same total amount whether you use the tax credits or just pay the tax. But by donating you get a say in how the money is spent by choosing which of the tax credit eligible organizations you contribute to.

You can contribute up to the amount of your expected Arizona tax liability. If you contribute more than your total state tax amount, the credits can be carried forward five years, so not to worry if you end up with more credits than taxes. In general, you must make your tax credit donations by April 15, 2018, in order for them to apply to the 2017 year. You can find additional information on the Arizona Dept of Revenue state tax credit page.

The McKenna Youth Foundation is a Arizona Credit for Donations Made to Qualifying Charitable Organizations (formerly know as the “Working Poor Credit”)

Contribution amounts eligible for credit: $400 for single filers/ $800 for joint.

How Tax Credits Work

Assume you normally pay about $3,000 in total Arizona state taxes. This year you decide to contribute to organizations eligible for the tax credit.

Let’s assume you make four tax credits (the Arizona Military Relief Fund Credit for $400, the Working Poor Tax Credit for $800, the Public School Tax Credit for $400 and the Private School Credit for $1,092) for a total of $2,692.

You get a dollar-for-dollar credit against state taxes owed for $2,692. By donating to tax credit eligible organizations, now your total state tax liability equals $3,000 less the credit of $2,692, for $308 of remaining tax liability. Your total dollars paid remains $3,000 whether you use tax credits or not – it’s either $3,000 all paid to the state, or $2,692 paid to tax credit eligible organizations and $308 paid to the state. If you had already paid in the full $3,000 in state taxes during the year, you would get a refund for the $2,692.

If you itemize your deductions, you also get to take a federal deduction as a contribution to a charitable organization for $2,692. This saves you $673 in federal tax at the 25% rate, or $403 at the 15% rate. (Note: if you had paid the state tax of $2,692 rather than contributing to the tax credit programs, the $2,692 would be part of your itemized deductions anyway as state taxes paid qualify as an itemized deduction, so this deduction may not be in excess of what you would get anyway.)

Your tax professional can answer additional questions about tax credits and the forms you need to file with your tax return to get the credit.

Please make a Tax Credit Contribution to the McKenna Youth Foundation and MAKE A DIFFERENCE IN A CHILD'S LIFE!