Frequently Asked Questions about the State Tax Credit

Q:      How does my gift to COAR qualify for the state tax credit? 

A:      COAR became certified as a qualifying charitable organization with the State of Arizona Department of Revenue in order to provide the tax credit benefit to our donors.  Legislation specifies that eligible organizations spend at least 50% of their budget on basic needs to low-income residents of Arizona and must be certified by the State of Arizona. 

Q:      What’s the difference between a tax credit and a tax deduction?

A:      A tax deduction is an item that helps determine what your final tax liability will be.  It reduces your total taxable income.  A tax credit is applied as a reduction to your final tax liability.  It reduces the total amount you owe in state taxes.  In this case, a tax credit comes right off the top of your state tax bill, lowering the amount of money that you will pay.

Q:      When is my baseline year?

A:      Your baseline year is the first year – as early as 1996 – that you itemized charitable contributions on your federal 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:      If I didn’t give to a charitable organization last year, can I still get a tax credit?

A:      Your baseline year begins with the first year you itemize your charitable contributions.  Once you establish a baseline year, you become eligible for this tax credit the following year.  So, if 2006 is your baseline year, you will be eligible for the tax credit in 2007 based on your charitable contributions in 2006.

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

A:      The 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. 

Q:      How do I document my contribution?

A:      COAR will send you a letter confirming your contribution.  This letter documents your contribution and is necessary to support your tax credit.  Please make sure you include your name and mailing address on your pledge card so that we can mail you documentation. 

Q:      How do I file for the credit?

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

Important Note to Supporters: 

COAR is not a tax advisor.  As with any financial recommendation, contact a qualified tax advisor for expert advice on your specific tax situation. 

Please consider making your COAR tax credit donation today!

For more questions, email: kdonley@coarweb.org