Arizona Tax Credit
WHO IS IBE?
The Institute for Better Education (IBE) (a nonprofit entity) is a school tuition organization providing scholarships for children to attend private Christian schools. Donations made to the fund are eligible for Arizona state income tax credit-maximum $1000.
Their purpose is to give support to Christian education through the provision of financial assistance for families who need help in covering the cost of tuition.
WHO CAN DONATE?
A married couple filing a joint return can give up to $1034 to The Institute for Better Education and receive a tax credit for the full amount of the donation. A single individual or head of household can give up to $517. This Arizona statute allows you to support school tuition organizations.
IS THIS RELEVANT FOR ME?
Yes, if you plan to file an Arizona tax return, this is relevant. A taxpayer who pays personal income tax to the State of Arizona can donate up to $1000 to Institute for Better Education (IBE) during any given tax year. The full amount can be taken as a tax credit during that year. (Married couples filing separate returns can claim a combined total of $1000). Receipts will be issued to each donor to be used for the tax purposes. Businesses cannot claim the donation as a tax credit, although donations from businesses are welcome and are tax deductible.
HOW DOES THE TAX CREDIT WORK?
A tax credit differs from a tax deduction in that it gives you full credit for the donation, thereby reducing your tax liability. A tax credit is better than a deduction because with a tax credit you receive a dollar-for-dollar refund from the Arizona Department of Revenue.
You owe $1,500 in Arizona income tax and you had $1600 in withholdings. Your refund from the State would be $100. Now assume you donated $1000 to the scholarship fund. Your refund from the State is now $1,100.
You owe $200 in Arizona income tax and you had zero in withholdings. Assume you donated $300 to the scholarship fund. Your tax due is zero. Also, you would have a $100 (donation) as a carryover, good as a tax credit for the next year.
WHO BENEFITS FROM THE SCHOLARSHIPS?Families wishing to send students to a private Christian school will benefit directly from your support to the fund. Scholarships for students are made possible, as funds are available, through an application that is made directly to the fund. Each application is evaluated on its own merit.
FREQUENTLY ASKED QUESTIONS
Yes, donors who itemize may deduct the contribution on their federal returns and still receive the dollar-for-dollar refund from the State of Arizona. (Note that for the State this is a tax credit, not an itemized deduction).
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