Q. What is the difference between a tax credit and a tax deduction?
A. A tax credit is applied as a reduction to your tax bill. In this case, the credit comes off the top of your state tax bill, lowering the amount of money that you must pay.
Q. Is this the same as the School Tax Credit?
A. This is a similar credit as the School Tax Credit. Taxpayers are able to take advantage of both opportunities.
Q. Do I qualify for the credit if my employer withheld taxes during the year?
A. The credit reduces your Arizona tax liability even if your employer withheld during the year. You would receive a refund equal to what your employer withheld less your tax liability after it is reduced by the allowable credit, i.e. your refund could be up to $400 higher ($200 single/head of household).
Q. Do I qualify for the credit if I do not owe taxes at year end?
A. The credit reduces your state tax liability independently from any tax that you may have withheld during the year. If you withheld an amount equal to or greater than your tax liability, the credit will increase your state tax refund.
Q. Do I qualify?
A. You must itemize charitable contributions on your state tax return.
Q. What happens if I don’t owe taxes at the end of the year?
A. The working poor tax credit reduces your overall state tax liability and is not impacted by your tax withholdings during the course of the year. If you withheld more than what you owed, the credit will result in an increase in your state tax refund. If you have no Arizona tax liability for the current year, you may carry the tax credit forward for up to five (5) years.
Q. How do I file for the credit?
A. There are two simple forms (AZ Form 301 & 321) that is included with your state tax filing that you or your accountant will complete. The forms are included with materials provided by the State of Arizona to all state tax filers. The form links are below:
Form 301 Form 321
Important note to donors:
AZTaxCredit.org is not a tax advisor. If you have questions regarding this tax credit, consult your tax advisor or contact the Arizona Department of Revenue at (602) 255-3381.