FAQ’s

GENERAL TAX CREDIT INFORMATION

What is the Individual Private School Tuition Tax Credit?
The 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. Individuals are entitled to a 100% dollar-for-dollar credit against their Arizona income tax owed, up to $1,000 per married couple or $500 per single person. AZTO then disburses tuition awards to students at participating private schools in Arizona. This tax credit program is regulated under ARS 43-1089.

What is a School Tuition Organization, STO? Does the AZ Department of Revenue certify STOs?
A school tuition organization is one that is tax exempt under Section 501(c)(3) of the Internal Revenue Code and allocates at least 90 percent 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 93% or revenue received. Beginning in 2011, the Arizona Department of Revenue will certify all school tuition organizations that are in compliance with the Private School Tuition Tax Credit Requirements. Prior to 2011, there is no requirement that the department certify a school tuition organization.

What schools are eligible for Tuition Grants from AZTO? May we recommend a school?
Northwest Christian School, Bethany Christian School, Christian Academy of Prescott, Joy Christian School, Legacy Classical Christian Academy, Paradise Valley Christian Preparatory, & Scottsdale Christian Academy are participating schools. You may recommend a specific student or you may recommend a school without having to choose a specific student. Donor recommendations are optional. If your school is interested in participating with AZTO, contact us at admin@azto.org.

STUDENT 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 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. Applications are valid for the entire school year, expiring in June. Applications need to be resubmitted annually, beginning in July for the upcoming school year.

When applying, is financial information required?
Yes. Financial information is now required from all families participating in the Private School Tuition Tax Credit Program. The State of Arizona has changed the 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 needed. A financial analysis for each member of your household is now required in a single worksheet format. Please see AZTO’s Application for more information.

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 (ie: financial, health, employment, etc), and recommendations. While recommending another child 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.

The desire of the donor will be reviewed in determining the grant allocation. However, the desire of the donor is subject to the complete and sole discretion of AZTO.

When will tuition grants be disbursed to the school for the tuition benefit of a student?
Most tuition grants will be distributed by the end of the next month following receipt of both Donation Form (with donation) or online contribution and a current approved AZTO Student Application. Therefore, disbursements can be awarded between 30 and 60 days after submission of both the application and donation. AZTO distributes educational tuition awards monthly between the third and fourth week. Since the vast majority of donations are received in December, make sure to apply by January 31st.

Do you make any special distributions?
Yes. An additional grant distribution is issued each March. This award disbursement is made from the general fund, where excess funds are distributed. This special distribution focuses heavily on financial need and special circumstances. Applications must be received by January 31st to be considered.

May a student receive funds from two or more school tuition organizations?
Yes.

DONOR INFORMATION

What is the maximum dollar amount of the credit?
The credit is equal to the amount contributed. However, for single taxpayers or heads of households, the credit cannot exceed $500. For married taxpayers that file a joint return, the credit cannot exceed $1,000 in 2010. 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.

What is the deadline to make a contribution in order to receive the tax credit?
With the 2010 Tuition Tax Credit Reforms, contributions can now be accepted through April 15th for 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.

Can a taxpayer claim both the Private School Tuition Credit and the Public School Tax Credit?
Yes. You may also donate $200 if you are a single individual or head of household or $400 for a married couple filing a joint return to the Public School of your choice.

Where do I get the tax forms needed to claim the credit?
Arizona Forms 301 and 323 are available by visiting the Department of Revenue website at 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 they are 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. More information can be found at www.irs.gov.

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 AZ Dept of Revenue, the IRS, or their tax advisor for specific guidance relative to their particular tax situation. Additional information may be obtained from the Arizona Department of Revenue.