What is a State Tax Credit
Your state tax liability is the total amount of tax you owe the state on your income. It is a percentage of your taxable income.
A state tax credit lowers your tax liability. Unlike deductions, which reduce your taxable income, state tax credits reduce your state tax liability by the amount you donate.
For example, If your income is $100,000, your Arizona state tax liability may be around $3,300. If you make a $1,000 state tax credit donation, your tax liability is reduced to $2,300. If you choose, you could donate your entire tax liability, and bring your tax liability to Zero.
State tax credits are taken when you file your Arizona personal tax return, resulting in either less taxes owed or a larger refund.
Please confirm with your tax professional before making any tax credit donation.