Who can take advantage of these tax credits?
These credits are available only to individuals. Partnerships and S corporations cannot pass the credits through to their partners or shareholders. The credits are also not available to trusts, estates, regular corporations, or S corporations.
Can a taxpayer receive a refund of these credits?
No. The credits may only be used to the extent they reduce a tax liability to zero. Any unused amounts may be carried forward for not more than five consecutive taxable years.
Can a taxpayer claim both credits in the same taxable year?
Yes. On the Arizona state income tax return, can a taxpayer claim both an itemized deduction and a tax credit for a contribution made to either a public school or a school tuition organization? No. Any amount claimed as a tax credit cannot be taken as an itemized deduction. However, you may still claim any excess over the amount claimed as a credit as an itemized deduction.
Must a taxpayer have a child in school in order to claim one or both of these credits?
Is a charter school considered to be a public school or a private school?
A charter school is defined in ARS 15-101 as a public school. Therefore, a charter school is eligible for the credit for contributions made or fees paid to a public school to support extracurricular activities or character education.
What do I have to do to qualify for this credit?
To qualify for the credit you must make cash contributions or pay fees to a public school for support of extra curricular activities or for character education programs.
Will I qualify for the credit if I pay fees for my own child to participate in an extra-curricular activity or character education program?
Yes. Fees that you pay for your own child to participate qualify for the credit.
Do contributions I make to the school qualify for the credit?
Yes. If the contributions are in support of extra-curricular activities or a character education program.
What is a character education program?
A character education program is a program defined in A.R.S. 15-719. Under this statute each district may develop its own course of study for each grade. At a minimum, the character education program must include instruction in the definition and application of at least six of the following character traits: truthfulness, responsibility, compassion, diligence, sincerity, trustworthiness, respect, attentiveness, obedience, orderliness, forgiveness, and virtue. Our board has approved the following list of programs, any extracurricular activity, art program, music program, athletic program, class project, and field trips.
What is the maximum dollar amount of the credit?
The credit is equal to the amount contributed or the amount of fees paid. However, for single taxpayers or heads of household, the credit cannot exceed $200. For married taxpayers that file a joint return, the credit cannot exceed $400. If married taxpayers file separate returns, each spouse may claim ½ of the credit that would have been allowed in a joint return.
What public schools and grades are eligible for the credit?
Public schools and charter schools that provide instruction in grades kindergarten through 12 are eligible for the credit. Nongovernmental schools, pre-schools, community colleges, and universities do not quality for the credit.
What is a fee paid for the support of extra curricular activities?
A fee is a dollar amount paid to a public school for the support of extracurricular activities. It is important to note that at least some monetary amount must be levied to participate in an extracurricular activity in order for the credit to be available.
What are extracurricular activities?
Extracurricular activities means school sponsored activities that require enrolled students to pay a fee in order to participate. Such activities may include, but are not limited to, use of band uniforms, use of equipment or uniforms for varsity athletics, or use of scientific laboratory equipment or materials. Generally, any educational or recreational activities that supplement the educational program of the school are considered to be extracurricular activities. ARS 15-342.24 requires each district school board to determine which activities are extracurricular and what fees will be levied.
What is an enrolled student?
An enrolled student is a student included by the school in its average daily membership count (ADM). Pre-school students, except handicapped students, and adult education students should not be included.
If a school establishes a central fund to pay for extracurricular activities, would a payment to this central fund qualify for the tax credit?
Yes. The credit is authorized for any fees paid by a taxpayer to a public school located in this state for the support of extracurricular activities.
Where should the central fund be held?
The central fund should be held at the Local Education Agency, but the LEA must separately account for the funds from each public school and not transfer funds from one public school to another.
Can a taxpayer make a contribution or pay fees to an organization (e.g., PTA, school foundation, school district or school club) which then gives the funds in a lump sum to the school or directly pays for extracurricular activities or character education?
No. ARS §43-1089.01 requires that the fees be paid "to a public school." Therefore, the payment must be made directly to the public school or district only.