The Arizona taxpayers (like taxpayers residing in many other states) have had the benefit of being able to make a charitable contribution to a qualified charity and take that amount not only as a tax credit against their Arizona taxes and get a dollar for dollar back on their tax return, but have also been able to take a federal tax deduction to save federal taxes. However, that could possibly change soon.
You can no longer double-dip, says the IRS!
On Thursday, August 23rd, the IRS issued proposed regulations that could affect your ability to utilize your state dollar-for-dollar tax credit as a federal deduction if you itemize.
Your State dollar-for-dollar tax credit contribution may need to be made by Monday, August 27, 2018 if you are planning to utilize it for a 2018 Federal deduction.
This is just a proposed regulation at this time but will be the final in all likelihood as IRS has been targeting the change for a long time. It states only tax credit contributions made after August 27, 2018 will be affected by these regulations.
To recap, Arizona has five principal tax credit opportunities:
* Public School donation
* Private School donation
* Donation to Military Family Relief Fund
* Donations to Qualifying Foster Care Charitable Organizations
* Donations to Qualifying Charitable Organizations
For those of you that aren’t familiar with all the different deduction opportunities for the Arizona credit, information can be found on Department of Revenue’s information regarding tax credits: https://azdor.gov/tax-credits.
As a reminder, contributions made to a charitable organization overseas are generally not deductible unless a tax treaty provides for the deduction.