Note: Beginning 2014, you must also complete Arizona Form 301, Nonrefundable Individual Tax Credits and Recapture, and include Forms 301 and 323 with your tax return to claim this credit.
Arizona law provides a credit for contributions made to a private school tuition organization that provides scholarships or grants to qualified schools. The credit is equal to the amount contributed. For 2014, the credit cannot exceed $528 for single taxpayers or heads of household. For married taxpayers that file a joint return, the credit cannot exceed $1,056. In most cases, for married taxpayers who file separate returns, each spouse may claim only one-half (1/2) of the credit that would have been allowed on a joint return. The credit eligible contributions made to a school tuition organization from January 1, 2015, to April 15, 2015, may be used as a tax credit on either your 2014 or 2015 Arizona income tax return.
If the allowable tax credit is more than your tax or if you have no tax, you may carry the unused credit forward for up to the next 5 consecutive taxable years’ income tax liability. This credit is available only to individuals. Corporations may not claim this credit. A partnership may not pass the credit through to its partners. An S corporation may not pass the credit through to its shareholders. A private school tuition organization is an organization that
meets all of the following:
- The organization is tax exempt under Section 501(c)(3) of the Internal Revenue Code (IRC).
- The organization allocates at least 90% of its annual revenue from contributions to educational scholarships
or tuition grants.
- The organization makes its scholarships or grants available to students of more than one qualified school.
A “qualified school” means a preschool that offers services to students with disabilities, nongovernmental primary or a secondary school that is located in Arizona. The school cannot discriminate on the basis of race, color, handicap, familial status, or national origin and requires all teaching staff and personnel that have unsupervised contact with students to be fingerprinted. A “qualified school” does not include a charter school or programs operated by a charter
school. The primary school must begin with kindergarten and the secondary school must end with grade 12. In the case of a preschool that offers services to students with disabilities, a “student with disabilities” is a student who has any of the following conditions.
- Hearing impairment
- Visual impairment
- Developmental delay
- Preschool severe delay
- Speech and/or language impairment
NOTE: The Arizona Department of Revenue is required to certify school tuition organizations. The department maintains a list of currently certified school tuition organizations on its website at www.azdor.gov. To qualify for the credit all contributions must be made to a certified school tuition organization. To determine if your contributions made in 2014 and/or 2015, qualify for this credit, you should verify that the school tuition organization you made a contribution to is certified. For a list of school tuition organizations certified to receive donations for the individual income tax credit, see the department’s
website. Your donation to the school tuition organization will not qualify for the credit if you designate the donation for the direct benefit of your dependent.
NOTE: Your donation will also not qualify if you designate a student beneficiary as a condition of your contribution to the school tuition organization. Also, the tax credit is not allowed if you agree with another person to designate each other’s contributions to the school tuition organization for the direct benefit of each other’s dependent, a practice commonly known as swapping.
You cannot claim both a tax credit and an itemized deduction for the amount of contributions made to a private school tuition organization for which you are claiming a credit. If you claim this credit in 2014 for a donation made from January 1, 2015, to April 15, 2015, you must make an adjustment on your Arizona Form 140, Schedule A; or Form 140PY, Schedule A(PY) or A(PYN); or Form 140NR, Schedule A(NR), filed in 2015. Before claiming this credit, make sure the school tuition organization issues you a receipt for the contribution. The receipt should show all of the following.
- Name and address of the school tuition organization;
- Name of the taxpayer;
- Amount paid; and
- Date paid.
Please keep this receipt with your tax records. For more information on school tax credits, see the department’s brochure, Pub 707, School Tax Credits.
NOTE: You may be able to make credit eligible contributions to a school tuition organization through payroll withholding. Check with your employer to see if
your employer has agreed to withhold contributions that qualify for this credit from your pay.