Tax Credits – Real Examples of How It Works

by Brian on December 1, 2011

To help illustrate how the Arizona tax credit can benefit you, we created a few scenarios to help understand the benefits for donators.   However, be sure you contact a tax expert/adviser to get more information for your individual situation.

Mr. Bell*1 Ms. Goodman*2 Mr. & Ms. Sanders*3 Mr. & Ms. Treglia*4
Filing Status Single Single Married Married
AZ Taxes Withheld $600 $300 $1,600 $800
Actual AZ Tax Liability ($705) ($250) ($1,350) ($800)
Net Tax Liability Refund (Due) ($105) $50 $250 $0
Amount Donated to AZ4Education $500 $300 $1,000 $900
AZ Tax Credit $500 $300 $1,000 $900
Tax Refund (Due) without a donation ($105) $50 $250 $0
Tax Refund (Due) with a donation to AZ4Education $395 $300 $1,250 $800
Carry Over to Next Year $0 $50 $0 $100

 

1) Mr. Bell

Mr. Bell is a single Arizona taxpayer, who owes $705, but has withheld only $600.   Mr. Bell will need to pay another $105 to the State to make up the difference when he files his taxes.  However, since he donated $500 to AZ4Education to help students in his community, he will actually get a $395 refund from the State, and he can use that money for something else.

2) Ms. Goodman

Ms. Goodman is a single Arizona taxpayer, who owes $250.   Since her employer withheld $300, she will receive $50 back from the State.   Ms. Goodman knows the future is dependent on our children and their education, so she gave $300 to AZ4Education.  In this case, the Arizona law stipulates that she can not receive a tax credit more than her tax liability (ie. she donated $300 and her tax liability is $250), so she will actually a refund from the State of $300 with a carry over credit to next year of $50.   Money well spent and savings for the future.

3) Mr. and Mrs. Sanders

The Sanders are a married couple filing jointly and have a tax liability of $1350.   They have withheld $1600, so they are expecting a refund of $250 from the State.    Considering they have children who are enrolled in a private school, they know the benefit of the STO program, so they have donated the maximum of $1000 to AZ4Education.    This means they will be helping another student with a scholarship and they will also be receiving a grand total of $1250.   More dollars to support their family and the community.

4) Mr. and Mrs. Treglia

The Treglia’s are married and filing jointly this year.  They have a combined tax liability of $800 and their employers have withheld the same amount.   However, they were interested in helping a family, whom they have known for many years, by donating to a school and naming their child as a recipient.  Their $900 contribution is more then the combined $800 tax liability, so they will get back $800 from the State, and have a carry over credit to next year of $100.

BE SURE TO CHECK WITH YOUR TAX ADVISER FOR CONFIRMATION OF HOW YOUR CONTRIBUTION AFFECT YOUR TAX PLANNING.

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