For a printer friendly version of this form, click here 2013 FAQs.
GENERAL TAX CREDIT INFORMATION
What is the “Original” Individual Private School Tuition Tax Credit? The “Original” Individual Income Tax Credit Program encourages Arizona Income Taxpayers to get directly involved in improving education in Arizona by re-directing their state income tax to organizations like AZTO that provide educational grants to participating private school students. For tax year 2013, individuals are entitled to a 100% dollar-for-dollar credit against their Arizona income tax owed, up to $1,034 per married couple or $517 per single person. AZTO then disburses tuition awards to students at participating private schools in Arizona. This tax credit program, implemented in 1998, is regulated under ARS 43-1089 and ARS 43-1601 thru 1605.
What is the PLUS (Private Learning Uplifting Students) Credit? In the spring of 2012, Arizona implemented an additional education credit, the PLUS Credit. This credit is designed to help new students to attend private schools that may not have otherwise had this educational opportunity, uplifting students in Arizona. For the tax year 2013, after the maximum donation ($1,034 for married couples and $517 for individuals) is met under the “Original” Tax Credit, all additional donations are automatically directed to the PLUS Tax Credit. You can donate an additional amount of up to $1,028 for married couples and $514 for individuals to the PLUS Tax Credit, bringing your total maximum contribution up to $2,062 for married couples and $1,031 for individuals. Please confirm student eligibility for this program. This tax credit program is additionally regulated under ARS 43-1089.03.
What is a School Tuition Organization, STO? Does the AZ Department of Revenue certify STOs? A School Tuition Organization (STO) is one that is tax exempt under Section 501(c)(3) of the Internal Revenue Code and allocates at least 90% of its annual revenue to scholarships or grants, and makes its scholarships/grants available to students of more than one qualified school. AZTO has historically allocated over 92% or revenue received. AZTO is audited annually by an independent accounting firm and annually reports to the Arizona Department of Revenue (AZDOR) with statute required information. AZDOR certifies all school tuition organizations that are in compliance with the Private School Tuition Tax Credit Requirements. AZTO is certified by the Arizona Department of Revenue.
What schools are eligible for tuition awards from AZTO? May we recommend a school? AZTO participates with the following schools: Northwest Christian School, Bethany Christian School, Christian Academy of Prescott, Flagstaff Community Christian School, Joy Christian School, Paradise Valley Christian Preparatory, Scottsdale Christian Academy, and Trinity Christian School. You may recommend a specific student or you may recommend a school without having to choose a specific student. Donor recommendations are optional.
When are applications available for 2013-14? What is the application deadline? Expiration date? AZTO’s 2013-14 Student Applications will be available in the spring of 2013. An approved application should be on file prior to any donor recommended contributions. A student must first be approved by AZTO to participate in the tax credit programs. Approved applications are valid for the entire school year. AZTO accepts applications throughout the school year. However, to be eligible for AZTO’s March Scholarship Distribution, applications must be received by January 31st for currently enrolled students. A current approved application must be on file before any tuition awards will be released in a student’s name. All 2013-14 Applications expire on June 1st 2014.
When applying, is financial information required? Yes. Financial information is required from all families participating in the Private School Tuition Tax Credit Program. The State of Arizona requires specific financial reporting guidelines for school tuition organizations. The reporting guidelines are determined by the federal reduced lunch program income analysis. Federal Tax Returns are not required. A financial analysis for each member of the household is required in a single worksheet format. Please see AZTO’s Application for more information.
If my child has been recommended by a donor for a tuition grant, do I still need to submit an application? Yes. Each student must submit an application each academic year in order to participate in the tax credit program. Donor recommendations are not the only factor that AZTO considers when allocating a tuition award. A current approved AZTO application must be on file before any tuition awards are issued.
What factors are considered when awarding a Tuition Grant? May we recommend another’s child? May we swap donations? Several factors are evaluated. Such factors include but are not limited to: merits of the student, character, perseverance, scholastic ability, citizenship, leadership, community involvement, other family needs (i.e.: financial, health, employment, etc.) and recommendations. Student participation in the tax credit programs may be limited for high income families. The desire of the donor will be reviewed in determining the grant allocation. However, the contribution is made with the understanding that AZTO has complete control and administration over the use of the recommended donation. While recommending a student is allowed, swapping with someone else’s child in exchange for their recommending your own child is strictly prohibited. Per the Arizona Private School Tuition Tax Credit Law: “NOTICE: A SCHOOL TUITION ORGANIZATION CANNOT AWARD, RESTRICT OR RESERVE SCHOLARSHIPS SOLELY ON THE BASIS OF A DONOR’S RECOMMENDATION. A TAXPAYER MAY NOT CLAIM A TAX CREDIT IF THE TAXPAYER AGREES TO SWAP DONATIONS WITH ANOTHER TAXPAYER TO BENEFIT EITHER TAXPAYER’S OWN DEPENDENT.”
Though student recommendations are allowed for both tax credits, the “Original” and the PLUS programs have different sets of qualifying criteria. Per Arizona Law, a student is only eligible to receive tuition awards under the PLUS Tax Credit if that student falls into one of the following categories:
a. Prior PLUS/Overflow Credit Recipient: If the student received a PLUS/Overflow Credit in a prior school year and continues to attend the private school, the student continues to be eligible for the PLUS Program. If the student received a PLUS/Overflow award from a school tuition organization (STO) other than AZTO, please submit the Scholarship Verification Form or a STO Award Letter specifying the credit award type with the student’s application.
b. Kindergarten Student: Currently enrolled in a participating school in a kindergarten program.
c. Public/Charter School Switcher: Student attended an Arizona governmental primary or secondary school as a full-time student for at least 90 days of the prior fiscal year and transferred to a private school. A Public School Attendance Verification Form is required.
d. Military Dependent: Student is the dependent of a member of the Armed Forces of the USA who is stationed in AZ pursuant to military orders. A copy of the military orders is required.
e. Prior Corporate Tax Credit Recipient: Student received a scholarship from either of the corporate school tax credit programs. The Scholarship Verification Form is required.
AZTO’s 2013-14 Student Application along with the Scholarship Verification Form and the Public School Attendance Verification Form are available at your student’s participating school or see link. The Scholarship Verification Form will need to be completed by the awarding school tuition organization. The Public School Attendance Verification Form must be completed by a prior public/charter school or school district representative.
When will tuition grants be disbursed to the school for the tuition benefit of a student? AZTO distributes tuition grants on a bi-monthly basis. Once a student’s application is approved by AZTO and a recommended donation is received in that student’s name, then that tuition grant is eligible to be issued the next distribution cycle following receipt of both the approved application and the recommended contribution. Tuition tax credit grants are issued bi-monthly, between the third and fourth week of the month. The school year distribution months are: July, September, November, January, March, & May. Grant distributions are made only for the current school year.
Does AZTO make any special distributions? Yes. An additional scholarship distribution is issued each March for currently enrolled students. This award disbursement is made from AZTO’s general fund, where unrecommended funds are distributed. This special distribution focuses heavily on financial need and special circumstances. Applications must be received by January 31st to be considered.
My student will be entering a participating private school (K-12) for the 2014-15 school year. When should we apply to AZTO? AZTO allows a student to participate in the tuition tax credit program up to a year prior to a student’s attendance at a participating private school. If a student will be receiving any donor recommended contributions the year prior, a 2013-14 approved application must be on file with AZTO. The pending awards will not be released to the school until the 2014-15 school year and only after a 2014-15 application has been additionally approved for the student. The first distribution of the new school year is in July.
May a student receive funds from two or more school tuition organizations? Yes. However, a student may only receive tuition tax credit awards up to the annual cost of tuition. Any excess funds must be returned to the last awarding school tuition organization.
May a student who is receiving Empowerment Scholarship Account (ESA) money from the Arizona Department of Education also received tuition tax credit awards? No, a student that receives ESA money is not eligible for any tuition tax credit awards for that same academic school year.
What are the maximum credit limits of the “Original” Credit and the PLUS Credit? The credit is equal to the amount contributed. For tax year 2013, the “Original” Tuition Tax Credit allows single taxpayers or heads of households to claim a credit up to $517. For married taxpayers that file a joint return, the credit allowed is up to $1,034. For married taxpayers who file separate returns, each spouse may claim only ½ of the credit that would have been allowed on the joint return. The PLUS (Private Learning Uplifting Students) Credit allows married couples to claim an additional $1,028 and allows individuals to claim an additional $514 after the “Original” Tuition Tax Credit limits are met. Arizona income taxpayers may claim both tuition tax credits totaling up to $2,062 for married couples filing jointly and $1,031 for individuals.
Why were the credit limits changed for the “Original” and PLUS Tax Credit Programs? The credit limits will now adjust annually based on the Consumer Price Index of the Phoenix Metropolitan Area. For tax year 2014, the “Original” credit limit will be $1,056/$528 and the PLUS credit limit will be $1,050/$525.
What is the deadline to make a contribution in order to receive the tax credit? Contributions can be accepted through April 15th for a tax credit in the previous calendar year. A contribution must be either postmarked by April 15th or received online by midnight on April 15th to be eligible for credit in the previous calendar year. For donations received in the first quarter (January 1st -April 15th), the state credit may be claimed for the prior or the current calendar tax year.
Can a taxpayer claim the “Original” Private School Tuition Credit, the PLUS Credit and the Public School Tax Credit? Yes. You may donate $200 individual/$400 married couple to the Public School of your choice. An interested donor may want to check their Arizona Tax Liability to ascertain how much credit they can claim in a given tax year. AZTO does not administer the Public School Tax Credit. Please contact the public school or school district of your choice for more information.
Where do I get the tax forms needed to claim the credit? Arizona Forms 301, 323, and 348 are available by visiting the Department of Revenue website: www.azdor.gov/Forms/credits.aspx. Typically, the forms are available in early December of each tax year.
Does AZTO accept matching gifts from employers? No.
May we recommend a grandchild to receive a tuition grant? Yes, as long as the student is not a legal dependent.
Who may claim these tax credits? These credits are available only to individuals who file Arizona state income taxes.
Is my donation also eligible for a federal income tax deduction? AZTO is a federally tax exempt 501(c )(3) charitable organization. Your donation may be eligible for a federal deduction. You should consult your tax adviser for specific tax advice concerning deductibility for you. If you make a contribution in the first quarter of the year and are claiming it for a state tax credit in the prior tax year, the federal deduction would only be eligible in the current tax year in which the donation is made.
How does the tax credit reduce my state income tax liability? 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.
These questions and answers are not intended to provide individuals with tax or legal advice. Interested persons should consult the Arizona Department of Revenue, the IRS, or their tax advisor for specific guidance relative to their particular tax situation. Additional information may be obtained from the AZDOR.