Frequently Asked Questions For Working Poor Tax Credits

Q.  What is the difference between a tax credit and a tax deduction?

A.   A tax deduction is an item that helps determine your final tax liability.  A tax credit is a reduction to your final state income tax liability.  Tax credits are very beneficial because they directly reduce your state income tax liability, lowering the amount of money that you will owe.

Q. How do I qualify for the Charitable Tax Contribution?

A.   To qualify, you must itemize charitable contributions on your tax return. You must establish a baseline year for charitable contributions (1996 or later). The donation to CPLC, a qualifying charitable organization, which exceeds charitable contributions in your baseline year is the amount of your tax credit. For example, if you had a baseline amount of $500, you must give $700 in total contributions including a $200 contribution to a qualifying charitable organization like CPLC, to be entitled to a $200 tax credit.

Q. If I didn’t give to a charitable organization last year, can I still get a tax credit?

A.   Once you establish a baseline year, you become eligible for this tax credit the following year.   

Q.  When is my baseline year?

A.   Your baseline year is the first year (which can be as early as 1996) that you itemized charitable contributions on your Arizona state income tax return.  If you did not itemize in 1996, then the first year after 1996 that you itemized your deductions becomes your baseline year.  Your baseline year does not change unless you change your filing status.

Q.  Is CPLC a qualified charitable organization under Arizona law?

A.  Yes, CPLC is an Arizona Department of Revenue certified charitable organization and spends at least 50% of its budget on basic needs to residents of Arizona.

Q.  What happens if I don’t owe taxes at the end of the year?

A.   Both the Charitable Organization and Arizona Public School Tax Credits reduce your overall state income tax liability. If you cannot use all your tax credit(s) in a given year, you will not receive a refund but will be able to  carry them forward for up to 5 years or until the credits are used.

Q.  How do I document my contribution?

A.   CPLC will send you a letter confirming your contribution.  This letter documents your contribution and is necessary to support your tax credit. Payroll deductions also require a pay stub receipt.  Please make sure you include your name and home address on the donation page.

Q.  How do I file for the credit?

A.  There is a simple form (AZ Form 321) that is included with your state income tax filing that you or your accountant can complete.  This form is included with materials provided by the State of Arizona to all tax filers.

Q. Can I receive multiple tax credits?

A. Yes, you can receive a dollar-for-dollar tax credits for both the Charitable   Contribution Tax Credit and the Arizona Public School Tax Credit.

Arizona Working Poor Tax Credit