How the AZ Working Poor Tax Credit Works

The Arizona Charitable Tax Credit provides an opportunity for state taxpayers to reduce their tax liability while supporting charitable causes. This non-refundable, dollar-for-dollar state tax credit is available to individuals who make cash donations to specific, certified charities. The program is designed to encourage financial support for organizations that deliver services to low-income residents throughout Arizona.

Taxpayer Eligibility Requirements

Eligibility for the Arizona Charitable Tax Credit depends on several factors, including the taxpayer’s filing status and whether they have dependents. There are no specific Adjusted Gross Income (AGI) limitations for a taxpayer to be eligible to claim this credit. The primary constraints are the maximum contribution amounts allowed, which vary by filing status.

The focus is on incentivizing donations to organizations that assist the state’s low-income population. Therefore, the key for the taxpayer is to ensure their chosen charity is a state-certified Qualifying Charitable Organization (QCO) or Qualifying Foster Care Charitable Organization (QFCO). The differentiation between these two types of organizations is important, as it affects the maximum credit amount a taxpayer can claim.

Qualifying Donations and Credit Amounts

The state of Arizona designates qualifying nonprofits as Qualifying Charitable Organizations (QCOs), which are entities that provide direct services to low-income Arizona residents who receive Temporary Assistance for Needy Families (TANF) benefits, are low-income, or have children with chronic illnesses or physical disabilities. A separate category exists for Qualifying Foster Care Charitable Organizations (QFCOs), which serve the foster care community and have distinct, higher contribution limits. Taxpayers can verify an organization’s status by checking the official list published annually by the Arizona Department of Revenue.

Only contributions made in cash are eligible for the credit. This includes payments made via:

• Check
• Credit card
• Debit card
• Payroll withholding arrangements

For the 2025 tax year, the maximum credit for donations to a QCO is $495 for individuals filing as single or head of household, and $987 for those married filing jointly. For donations made to a QFCO, the limits are higher, at $618 for single and head of household filers and $1,234 for married filing jointly taxpayers.

This credit provides a dollar-for-dollar reduction of your Arizona income tax. For instance, if a single filer owes $600 in state taxes and makes a $495 contribution to a QCO, their final tax liability is reduced to just $105. A key feature of this credit is that contributions made up to the tax filing deadline, typically April 15th of the following year, can be applied to the preceding tax year.

How to Claim the Credit

The forms must be completed and submitted with the taxpayer’s state return, such as the Form 140 or 140A. For contributions to QCOs, taxpayers must file Arizona Form 321. For contributions made to QFCOs, taxpayers must use Arizona Form 352.

To complete the appropriate form, the taxpayer needs specific details from their donation. This includes:

• The full name of the organization
• The unique 5-digit code assigned to it by the Arizona Department of Revenue
• The exact dollar amount of the cash contribution
• The date the donation was made

This information is typically provided by the charitable organization in a donation receipt or acknowledgment letter. The total credit amount calculated on the form is then transferred to the designated credit line on the main Arizona tax return.

A significant feature of this tax credit is the five-year carryforward provision. If the calculated credit is greater than the taxpayer’s total tax liability for the year, the unused portion of the credit, up to the maximum annual limit, is not lost. It can be carried forward and applied against tax liabilities for up to five consecutive future years.