NEW IRS PROPOSED REGULATIONS DISALLOW FEDERAL DEDUCTION
FOR ARIZONA TAX CREDIT DONATIONS
The IRS issued proposed regulations (REG-112176-18) on August 23rd that will no longer allow a charitable deduction on the Federal tax return for the Arizona state tax credit donations made after August 27, 2018. This will apply to the Qualifying Charitable Organization, Qualifying Foster Care Organization, Public School, Private School Tuition Organization, Military Family Relief Fund and other tax credits in Arizona.
If you do not expect to itemize deductions under the new tax law, this will not have any tax effect on the contributions you would make. Thresholds for itemized deductions for 2018 are $24,000 for married couples filing jointly, $18,000 for head of house hold filers and $12,000 for single filers.
If you expect to itemize under the new tax law, the proposed regulations will reduce the deductions you are allowed to claim. We recommend making your Arizona tax credit donation payment before August 28, 2018 to be able to claim the charitable deduction on your 2018 Federal tax return. If you make donations in excess of your 2018 taxes, you are able to carryover the credits on your Arizona tax return for up to 5 years. Depending on your tax situation, it could be beneficial to make donations before August 28th in excess of your expected 2018 tax liability and carryover the remaining credit to future years, to be able to claim the maximum deduction for those donations on your 2018 Federal tax return.
In light of this new regulation, the tax credits can still be a great opportunity to redirect your tax dollars and possibly receive a dollar for dollar offset for your contributions. But you will no longer receive the double benefit of the Arizona tax credit and the Federal tax deduction after August 27, 2018.
If you have questions, please talk to your tax advisor, or Schutte & Hilgendorf, CPAs.
Schutte & Hilgendorf offers a broad range of professional accounting, tax, and audit services to individuals and businesses throughout Yavapai County and Northern Arizona. With over 40 years combined certified public accounting experience, we specialize in providing services to numerous industry specific areas, including non-profit organizations, homeowner’s associations and construction contracting. We also provide tax planning and preparation, sales tax and payroll tax return preparation, ongoing accounting/bookkeeping, live payroll, and QuickBooks setup and training (QuickBooks Proadvisors). Come in and see us anytime at 2086 Willow Creek Road, Prescott, Arizona, call us at 928-778-0079 or check out our website at www.prescottaccountants.com.