Living in Arizona brings lots of unique opportunities: year-round shorts weather, the ability to get away with a tiny coat closet, and the opportunity to take advantage of great tax benefits for supporting education in our state.
Arizona offers individuals three credits against state income tax that benefit education. By donating, you are redirecting a portion of your tax dollars to support education in our state and get a dollar-for-dollar reduction in your state income taxes.
Credit for Contributions Made or Fees Paid to a Public School
You can claim a credit for making contributions to or paying fees to a public or charter school to support extracurricular activities or character education programs. The maximum credit is $200 for a single taxpayer, $400 for a married couple. A Department of Education sponsored list of eligible schools can be found here.
Extracurricular activities include use of band uniforms or athletic equipment, use of scientific lab equipment and materials, or trips that are solely for competitive events. They don’t include senior trips or events that are purely recreational, amusement, or tourist activities. The credit was recently expanded to allow parents to use the tax credits to pay fees for college-preparatory exams such as SATs.
These tax credit donations have been a huge driver of extracurricular activities in Arizona’s schools. Statewide, taxpayers contributed nearly $51 million to public schools in 2014. That works out to about $45 per student. The donations allow schools to fully fund sports and other activities without dipping into their operating budget, allowing districts to spend more money in the classroom.
Credit for Contributions to Private School Tuition Organizations
There are two credits available for donations to Private School Tuition Organizations that provide scholarships for private school students. For 2015, the combined maximum credit is $1,067 for a single filer and $2,134 for a married couple. A list of certified School Tuition Organizations can be found here.
You cannot claim a credit for paying tuition for your own child or for donations benefitting a family member. You are allowed to make a recommendation to support a certain student, but the recommendations are not guaranteed. You are also not allowed to agree to “swap” donations with another taxpayer to benefit each other’s children.
Is there a downside?
Both the Public School credit and the Private School Tuition Organizations credits have received their share of criticism. Opponents of the Public School credit point out that a handful of schools in wealthier areas collected enough donations in 2014 to average more than $400 per student, while others got little or none. Critics of the Private School Tuition Organization contend that donating to private schools takes money away from public schools and supports wealthy private school families.
While there may be truth to those statements, the fact is that Arizona provides less state funding per student than any other state in the nation and state lawmakers have repeatedly cut school spending in the face of budget shortfalls. These credits allow parents and residents of our state who value education to redirect their tax dollars to support education in our state. The Public School credit allows schools to focus their limited resources to the classrooms, rather than diverting money from their general fund for – or eliminating entirely – extracurriculars and athletics. The Private School Tuition Organization credit makes quality education accessible to kids who otherwise could not afford it. Three percent of the approximately $140 million collected annually is designated specifically for special-needs students. Thirty-two percent goes to children of “low income” families, defined as those earning 185% of the federal poverty level, or $44,862 for a family of four.
If you don’t have children in school or if your child attends a school that is already leading the pack in tax credit dollars, consider donating to schools in our state that receive fewer donations and would otherwise have to cut back on extracurricular activities or supplement them with their operating budget. The Arizona Department of Revenue publishes a report annually listing the number of donations, average per donor, and total tax credit dollars received for each school in the state.