State tax deductions through contributions to School Tuition Organizations
An investment in education can deliver returns through a lifetime and beyond. Fortunately, Arizona offers a wonderful way to make an education available to a child whose family has chosen a private school, and it’s not too late to have that act of generosity and empowerment afford you a break on your 2014 state taxes as well.
If you’re just realizing that you may need to increase your tax credits, all the more reason to consider donating to a School Tuition Organizations (STO). Donors have until April 15, 2015, to be able to claim the credit on their 2014 Arizona state tax returns.
Under Arizona law, as outlined by the State of Arizona Department of Revenue, state taxpayers may donate to their choice of approximately 50 private 501(c)(3) STO organizations. The STO receiving the donation must direct at least 90 percent of contributions toward student scholarships and make those scholarships available for more than one school. The scholarships go to K-12 students (and some preschoolers with disabilities) attending private schools, often religiously-affiliated schools. Additional conditions may apply for receiving the scholarships.
Approximately 350 schools participate in the STO programs. The Department of Revenue’s School Tax Credits document outlines the particulars of the law. There is no income limit for individuals or married couples to donate, and scholarships can be granted to a student by the STO in any amount. Donors can suggest a student beneficiary but STOs cannot award scholarships solely upon donor recommendations. The STO must consider the financial needs of the student.
According to Arizona Tuition Organization, in the 2014 tax year, individual taxpayers contributing to STOs may claim a dollar-for-dollar credit of up to $1,053, and married couples filing jointly may claim up to $2,106. These amounts are made up from the original Private School Tuition Tax Credit, which allows for credits of up to $1,056 for married couples filing jointly and $528 for individuals, as well as the Private Learning Uplifting Students (PLUS) credit, which allows $1,050 of additional credits for the married couples and $525 for individuals.
Keep in mind that the deadline for charitable donations that can be deducted on your Federal tax return is still December 31, so if you donate to an STO this year and claim the credits on your 2014 Arizona state taxes, you cannot claim the deduction on your federal tax return until you file your 2015 federal taxes.
All information has been obtained from sources believed by The Biltmore Bank of Arizona to be accurate and reliable. However, you should consult your tax advisor before taking any action on topics discussed in this blog.
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