Advantage of AZ Qualifying Charitable Organization Tax credit
How is a credit different from a deduction?
A deduction reduces the amount of your income upon which the tax is determined. A credit reduces your tax liability as if you had already paid the tax.
How It Works
Tax Credit vs Tax Deduction Example
TAX Credit Example
- Joe and Mary earned $50,000 this year. They made an $800 gift to BizELife which is a Qualifying Charitable Organization for the tax credit. Their Arizona tax liability based on $50,000 in earnings is $1,680. They can take an $800 credit against their tax liability reducing it to $880.
$1680 Joe and Mary original AZ tax liability
−$800 AZ Charitable Tax Credit for BizELife donation
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$880 Joe and Mary’s final AZ tax liability
TAX Deduction Example
- Joe and Mary earned $50,000 this year. They made a $800 gift to other charities not qualified for AZ tax credit. Their taxable income is reduced by $800 and their liability is now based on $49,200. In 2017 that means their AZ tax liability is $1,255.
$50,000 Joe and Mary taxable income
−$800 ABC charitable donation (not BizELife)
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$49,200 Joe and Mary reduced taxable income
$1,183 possible AZ tax liability (no other itemize deduction and 2 personal exemptions.
−$800 ABC charitable donation (not BizELife)
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$49,200 Joe and Mary reduced taxable income
$1,183 possible AZ tax liability (no other itemize deduction and 2 personal exemptions.