How to save on your taxes by supporting Local First Arizona
Over the past few years, Amy Bird has exercised a financial habit that lowers her tax liability and improves the bottom line for Local First Arizona. She makes a contribution.
“I look forward to it annually. It’s one of the ways I support an organization I really believe in,” Bird, a Local First Arizona board member, said. “It’s one of the ways I'm contributing, in a small way, to making our state a good place for everybody. The hardest thing is doing it the first time and figuring out how it works. Once you do it once, you’re set.”
Local First Arizona Board Chair Amy Bird
The contribution decreases what she owes the state of Arizona for that tax year and adds to the revenue of a charitable organization she supports, a win-win in her mind.
“I can not think of a better use of Arizona tax dollars, or my tax liability specifically, than supporting Local First’s programming,” Bird said. “The breadth and depth of Local First’s work, the way it touches our food systems, building communities of entrepreneurs, addressing sustainability, working throughout the state in urban and rural areas and all counties, for a more vibrant and inclusive economy…that’s what tax dollars, in my mind, are meant to do. It feels great to be able to direct them.”
It sounds simple enough, but it’s fair to say that contributions to qualifying charitable organizations can be confusing. Here are six things to know as you prepare for tax season.
What is a “QCO”?
Qualifying charitable organizations, also referred to as QCOs, are nonprofits certified by the Arizona Department of Revenue to participate in the tax credit program. Arizona taxpayers can reduce the taxes they owe the state dollar-for-dollar by contributing to a QCO.
There are hundreds of QCOs, including Local First Arizona. Find a list of qualifying organizations under “List of Qualifying Charities.”
Going beyond schools
Parents to school-aged kids may recognize the QCO tax credit as similar to Arizona’s public school tax credit. That credit allows taxpayers to apply the cost of certain academic and athletic fees to their state income tax return. Another similar program is the Qualified Foster Care Charitable Organization (QFCO) tax credit, which supports nonprofits working with foster children and families.
The QCO tax credit is a bit different, in that the money can be given to any nonprofit certified by the Arizona Department of Revenue. Find a list of qualifying organizations under “List of Qualifying Charities.”
Mark your calendar
Contributions to QCOs can be made on or before April 15. Taxpayers can choose to apply that contribution to the taxes they are filing for the previous calendar year or wait and apply them to the taxes they will file for the current year.
For example, you can make a contribution to a QCO like Local First Arizona as late as April 15, 2024, and choose to utilize that tax credit on your 2023 tax return or your 2024 tax return, but not both.
To claim the credit, you must file “Form 321” with the Arizona Department of Revenue and identify Local First by using the QCO code 22141. Your tax professional or online tax preparation software may be able to help you file this form. Download Form 321 here.
Maxing out
The maximum contribution permitted can change from year to year. Here are some important numbers for the 2023 and 2024 tax years:
The maximum contribution permitted for 2023 tax returns is $421 for taxpayers who are single, married but filing separately or head of household. The maximum contribution for a married couple filing jointly is $841.
The maximum contribution permitted for 2024 tax returns is $470 for taxpayers who are single, married filing separately or head of household. The maximum contribution for a married couple filing jointly is $938.
Contribution vs. donation
Technically, the QCO tax credit program involves a contribution, not a donation, made by a taxpayer. If a taxpayer does not make a QCO contribution, they have to pay that amount in the taxes they owe the state.
So the QCO program allows taxpayers to direct where they want a portion of their taxes to go.
Talk to your tax advisor
Since contributions to QCOs have limitations, are non-refundable and are eligible to be carried over, be sure to talk with your tax advisor before making one.
To make a tax credit contribution to Local First Arizona, go to localfirstaz.com/donate.
