Even as a dutiful taxpayer, sometimes you want to designate where your income tax goes. There may be a cause you want to support directly. While the national and state government appropriates much of the taxes, there is a chance to do it without cost.
What Is a Tax Credit?
The national government and states like Arizona encourage local contributions and community donations with the tax credit program. It works by directly cutting your total tax by the credit amount, unlike a deduction that only reduces your taxable income. For example, giving $400 to a qualified organization slashes your income tax by the same amount.
The program’s primary aim is to incentivize beneficial behaviors from the residents. Specific organizations also depend on contributions to function and continue their services. That is the reason Arizona promotes donations to local charities with its charitable tax credit.
Charitable Donations and the Arizona Tax Credit
The charitable tax credit is a unique way to direct your tax to your supported cause. It’s a win-win situation- you help a beneficial program by donating your tax to them. Arizona has plenty of charities with various generous objectives for you to choose from and support.
Arizona also has one of the best tax credit programs for charitable donations in the country. It limits the amount in each of the qualified categories but allows you to donate in all of them. It also applies only to money and not items and goods.
How Do I Get a Charitable Tax Credit?
When you donate to a qualified charity, they hand you a receipt of your contribution along with their institution’s code. You can register the code, called the Qualified Charitable Organization Code, on your tax return to avail of the credit. It is important to note that you should include an additional form when submitting your tax return.
The process is that simple. The best thing about it is there is no disadvantage donating; instead, you receive a sense of satisfaction in giving. So, find an Arizona charity that moves you, direct your donations, and get yourself a tax credit.