Can I still deduct a 2018 Arizona Tax Credit on my Federal Return?
In 2017, a donation that qualified for an Arizona Tax Credit was 100% refundable on your Arizona Tax Return and qualified as a Federal Tax Deduction on Schedule A of your Federal 1040. Unfortunately, only tax donations made before August 27, 2018 will qualify as both a Federal Deduction and Arizona Tax Credit. After August 27, 2018 you have the choice of one or the other.
Should I use the Arizona Tax Credit or the Federal Deduction after August 27, 2018? Since the Arizona Tax Credit is a credit that refunds 100% of the deduction and the federal deduction is only a deduction from income, always choose the AZ Tax Credit.
Example, you make a $400 donation that qualifies for an AZ tax credit. You will save $400 of tax on your AZ individual tax return. If you choose to take the deduction on your federal tax return and you are in the 18% tax bracket, your tax savings would only be $400 x .18 = $72.00. So you saved $328.00 in tax dollars by choosing to take the AZ Tax Credit over the Federal Tax Deduction
Call H&S Accounting for all your tax preparation needs and let our years of tax expertise save your tax dollars. We are your business and individual tax experts.
Tim Walch, CPA