Broker Check

6930 E Chauncey Lane, Suite 220, Phoenix, AZ 85054

TEL.602.494.4100

FAX.602.494.1444


Last minute tax tip!

| December 30, 2016
Share |

Attention Arizona Residents

 

 

What?  Make money with tax credits?  Yes, receive a dollar for dollar reduction in your state taxes and make money by using tax credits!

In short, the State of Arizona has excellent tax credits from which almost all taxpayers can benefit. Essentially, the credits let you direct some of your state tax dollars to institutions of your choosing and by doing so you receive a dollar for dollar reduction in your state taxes. Better yet, most people will actually make money by using these credits!  Joe McInerney, EA, CFP at Wisdom Wealth Tax Services strongly recommends his clients take advantage of this opportunity.

  

There are now six credits which all work the same way. You make a contribution to an approved organization for a specified dollar amount, and your Arizona income taxes are reduced, dollar for dollar, by that amount. If you would ordinarily be due a refund, your refund can be increased by the amount of the credit you used. If you would ordinarily owe money, your balance due can be reduced by the amount of the credit you used. Generally, you have until April 15, 2017 to contribute and qualify for a 2016 credit. However, to qualify for a 2016 charitable deduction, contributions must be made by December 31, 2016.

Summary of 2016 Credits

If you’re familiar with the credits and just want the updated 2016 numbers, use this chart. Details do matter! If you are unfamiliar with the credits, keep reading, or call Joe McInerney, EA, CFP at 602-494-4100.

Credit Limit

Credit

Single/HOH/MFS

Married Filing Joint

Contribution Deadline*

Public Schools

$200

$400

4/15/17

Private Schools

$545

$1090

4/15/17

Private Schools (Adtl)

$542

$1083

4/15/17

Charitable Organizations

$400

(Increased Limit!)

$800

(Increased Limit!)

4/15/17

Foster Care Organizations

$500

(Increased Limit!)

$1000

(Increased Limit!)

4/15/17

Military Family Relief

$200

$400

Closed for 2016

* Although you have until April 15, 2017 to contribute and qualify for a 2016 credit, to qualify for a 2016 charitable deduction, contributions must be made by December 31, 2016.

  

The best part of the credits is not the dollar for dollar offset to your tax liability. While that is nice, if you think about it, all it does is let you direct your tax dollar. You get no benefit, other than the intangible and undeniably good feeling of helping an institution of your choosing. The real sizzle of the tax credits is that, if you itemize your deductions, they make you money!

 

This is because, generally, the institutions that qualify for the credit on the Arizona return qualify for a charitable deduction on the federal return. Now you are getting a deduction for money the state of Arizona is giving back to you as a credit. If you are married and in the 25% tax bracket, you can save up to $1,193 in federal taxes by using the credits.  You save federal taxes on money the State of Arizona is giving you back. This is money in your pocket!

 

To qualify for a charitable contribution, neither you nor your children can receive a direct benefit from the contribution. Additionally, the organization must have ultimate control over how the funds get allocated. So, contributions to a School Tuition Organization (STO) can qualify for both a credit and a deduction if a specific child is the recommended beneficiary of the funds, as long as the STO has the authority to redirect those funds elsewhere. On the other hand, if Mrs. Smith contributes to her daughter Sally’s school band and her contribution directly pays Sally’s band fees, Mrs. Smith still qualifies for an Arizona tax credit, but not a federal tax deduction. Remember, qualifying for both a credit and a deduction is key – it puts money in your pocket!

 

That’s some complicated stuff, and like most tax law, there are lots of ifs and thens to consider. If you are confused about how this all applies to you, contact Joe McInerney, EA, CFP to find out if and how you should use the credits.

 

Recommended Tax Credits

Now, some easier stuff. There are six credits that Joe strongly recommends most people use. Below are the descriptions and links to find organizations that qualify.

 

Arizona Military Family Relief Fund

 

This outstanding fund provides assistance to the families of Arizona service members who are currently deployed or who have been killed or injured and are facing financial hardship due to their deployment. The maximum credit is $400 if Married Filing Joint and $200 for all other filing statuses. The credit is capped at the first $1,000,000 of contributions each year and always reaches its limit. Act quickly to use this credit at https://dvs.az.gov/military-family-relief-fund-2015. **As of this writing, this credit has reached its annual maximum**

 

Private School Tuition Organizations

 

These organizations provide tuition assistance to K-12 students in private schools. The maximum credit is $1,090 if Married Filing Joint and $545 for other filing statuses. Many of these organizations allow the donor to nominate a student to receive the benefit. Remember, as long as the STO has the authority to override that nomination and you’re not nominating your own child, the contribution can qualify as a charitable deduction.

 

This credit has been expanded! Once you have made the full $1090/$545 contribution for the basic credit, and additional $1083/$542 contribution is now eligible for a second credit.

 

A list of qualifying organizations can be found at https://azdor.gov/TaxCredits/SchoolTaxCreditsforIndividuals.aspx

Contributions to Public Schools

 

Contributions to Arizona public schools in support of extracurricular activities or character education qualify for a credit. The maximum credit is $400 if Married Filing Joint and $200 for other filing statuses. All Arizona public and charter schools that provide instruction in grades kindergarten through 12th grade are eligible entities. If you haven’t been hit up yet, walk into any public or charter school and tell them you’d like to make a tax credit contribution. They’ll be more than happy to help you!

 

Contributions to Qualifying Charitable Organizations

 

Limits are doubled for 2016!

This is a credit for CASH contributions to qualifying organizations; contributions of goods do not qualify. The maximum credit is $800 if Married Filing Joint and $400 for other filing statuses. (The old baseline-year criteria for this credit has been dropped, so if you haven't been able to use the credit in the past, chances are good that you can now.)

 

An eleven page list of very worthy qualifying organizations can be found at https://azdor.gov/TaxCredits/QualifyingCharitableOrganizations.aspx. One great example of a qualifying organization is Justacenter.org, a resource center for homeless senior citizens. Another is http://ryanhouse.org/ where respite, palliative, and end-of-life care is provided to children with life threatening conditions.

Contributions to Qualifying Foster Care Charitable Organizations

Increased limits for 2016!

Like the above charitable credit, this credit is for cash contributions only. The limits are the same, $1000 if Married Filing Joint and $500 for other filing statuses. The list of qualifying organizations is available here: https://azdor.gov/TaxCredits/QualifyingCharitableOrganizations.aspx.

One to Consider

The Foundation for Blind Children does great work for blind and low vision children and adults. They qualify for both(!) the School Tuition Organization and Charitable Organization credits. To contribute, visit Foundation for Blind Children or give a call to their CEO, Marc Ashton. Let Marc know that Joe McInerney said to call; he’ll be delighted to hear from you! His number is 602-678-5801.

 

 

Share |

Check the background of your financial professional on FINRA's BrokerCheck.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Some of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named representative, broker - dealer, state - or SEC - registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

Advisory Services offered through Wisdom Wealth Investment Advisors, LLC, a Registered Investment Advisor.

Securities offered through Concourse Financial Group Securities, Inc. (CFGS), a Registered Broker/Dealer and Member FINRA/SIPC 

CFGS is an independent entity. 

For a copy of CFGS’s Form CRS please visithttps://www.concoursefinancial.com/investor-disclosures