Why are tax credits so complicated?

Many Arizona taxpayers miss an opportunity to give back to the community because they don’t know about the Arizona tax credits, or are uncertain of the process.

We sat down to talk with Southwest Human Development’s Chief Development Officer Jake Adams to learn more about the Arizona Charitable Tax Credit, how tax credits help the community and why they can appear complicated to Arizona taxpayers.

What is a tax credit and how is it different than a tax deduction?

It’s easy to get confused about the difference between tax credits and tax deductions, which sound similar but serve different functions.

A tax deduction lowers your amount of taxable income. In contrast, a tax credit actually gives you the full amount of dollars back into your pocket up to whatever the limit is, as well as the amount you have liability to the state or federal government.

What is the Arizona Charitable Tax Credit and why is it so confusing?

The Arizona Charitable Tax Credit is one of five tax credits available to Arizona taxpayers. It is directly associated with the Arizona Department of Revenue, so it’s applies to your state taxes rather than federal. The qualifying Arizona nonprofit charitable tax credit is limited to $400 per person, which means a married couple can file jointly for up to $800.

One of the things about the tax credit that’s extra confusing is that there’s no other state in the nation that offers this. I personally have not paid taxes to the state of Arizona in years because I’ve maxed out my tax credits. People sometimes forget that the rules have changed and individuals can now annually take advantage of each of the tax credits, including the Arizona Charitable Tax Credit, Foster Care Tax Credit, Public School Tax Credit and Private School Tax credit without having to choose one over the other.

It is easy to contribute via the Arizona Charitable Tax Credit? How so?

Yes, taking advantage of the Arizona tax credit is more simple now than ever. People used to be required to itemize deductions in order to receive the tax credits, but that’s not the case anymore. I would encourage people to talk with their tax advisor and plan for what works best for them. After writing a check or contributing online, make sure to file your receipt in your tax documents so you have it handy. I recommend writing “qualifies for Arizona Charitable Tax Credit” on your receipt as a reminder for yourself or your tax advisor!

Why should people take advantage of the Arizona Charitable Tax Credit?

An important advantage of contributing via the Arizona Charitable Tax Credit is that taxpayers are able to steer where their dollars go. Individuals can visit TaxCreditTeam.org to review some of the organizations that qualify for these tax credits, find what causes they hold near to their heart and choose how they make a direct impact in the community.

If you think it’s important that young children get a great start in life, Southwest Human Development and each of the Tax Credit Team partners are great options. A number of our programs are not funded by the state and federal government and wouldn’t exist without financial support from the community. Individuals’ generosity can make a huge impact.

Learn more or make a contribution to qualify for the Arizona Charitable Tax Credit at swhd.org/taxcredit!


Southwest Human Development does not offer tax advice. Always consult with a qualified, licensed professional regarding all tax-related issues. All content in this article, including any advice or commentary from Southwest Human Development staff and/or others, should be considered an opinion and is provided for informational purposes only. The content is not intended to be a substitute for medical or other professional advice, diagnosis or treatment. Always seek the direct advice of your own trusted professional with any questions or concerns you may have regarding the child/ren in your care. Southwest Human Development does not recommend or endorse any specific tests, products, procedures or other information that may be mentioned in this article. You may contact Southwest Human Development’s Birth to Five Helpline at 1-877-705-KIDS (5437) to speak with one of our early childhood professionals for personalized assistance. Birth to Five Helpline specialists are available Monday through Friday from 8 a.m. to 8 p.m.