Tax Credits

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As the end of the year approaches, time is running out to make a charitable contribution that will count as a tax credit on your 2011 tax return. Enrolled Agent Ellen Campbell talks about some of the tax credits available to Arizona taxpayers.

Ted Simons: 2010 is almost over, which means time is running out to make a charitable contribution that will pay you back at tax time. Here to tell us more is Ellen Campbell, she is an enrolled agent with Campbell tax and financial Services in Phoenix. Good to have you here. Thanks for joining us.

Ellen Campbell: Thank you.

Ted Simons: OK, a basic definition here for those who still maybe aren't up to speed on this. The difference between a tax credit and a tax deduction.

Ellen Campbell: The good news is the credits are actual -- pays tax directly. Where a deduction reduces the total amount that's taxed. The credit gives you the money back. So it actually is much more beneficial to you than a regular tax deduction. Both are available with these credits we're going to talk about today.

Ted Simons: So the credits are basically if we talk about something someone is interested in, they go ahead and contribute that amount up to a certain amount, and they get that back?

Ellen Campbell: The state of Arizona gives it back in the form of a reduced income tax.

Ted Simons: And how much is allowed now?

Ellen Campbell: Well, the total for a married couple is $2,200. Back in your pocket. If you give that much away.

Ted Simons: That's a married couple, single?

Ellen Campbell: Single is $1,100.

Ted Simons: Now those are totals. But they have to come in four different -- what -- how does that work?

Ellen Campbell: You have to give it exactly the way the legislature presents it. It's four different categories of donations. The categories are the Arizona military family credit, and that's a very specific one, but again, that limit for singles is $200. But for a married couple, $400. If you give $400 to the Arizona military family relief fund, you get $400 back when you file your tax return. I need to say that right up front, there are people that actually pay no Arizona taxes. And I'm not talking about people who write checks -- it doesn't matter if you get a refund ordinarily, you can get a bigger refund if you take advantage of these credits. But if you have no tax in Arizona, because you have great deductions, or low income, these credits won't help you. But if you overpay in one year, it will roll forward to the next year. So you don't lose the whole thing.

Ted Simons: Interesting. I want to get to these four categories. The Arizona military family relief, private schools as well, and those limits are higher than the others correct?

Ellen Campbell: Those are the ones that are really high. $500 for a single person, and $1,000 is the maximum you can get for a married couple. Private school tuition organization, not the private school itself, but the tuition organization. Any private school can tell you they'll have to make the donation.

Ted Simons: Indeed, and obviously this has been a controversial issue. The legislature look the at it this past session and decided not only do we like it, we're going to up to that limit and a lot of folks were crazy about it, we've talked about it on "Horizon" quite a bit. But that's number two. Number three, public schools as well.

Ellen Campbell: Public schools is for extracurricular activities. That limit is different, it's $200 for singles, and $400 for married couples. And again, this is only for extracurricular things, but includes field trips, so think what your money can do to benefit the education of your own child or children that you know. You could support the football team, or the chess club, or a field trip that kind of out of classroom norm.

Ted Simons: And the fourth, out of the four, although probably number one for a lot of folks, would be working poor as well.

Ellen Campbell: Yes. This is for charities that benefit the working poor. Now, these charities are not as plentiful as they were last year, all the charities had to recertify, so there are only about 50% of them that were last year. So the best advice is, all that you can give the same amounts up to $200 for singles, $400 for marrieds, you have to ask the charity now, do you qualify for the working poor credit. Because only the charity can really tell you if they do. There is a list, however, published by the -- on the Arizona department of revenue website. It's kind of long, and you have to look for it, but you can see the list of charities.

Ted Simons: What is the process for filing for these credits? Are there receipts to keep, was there a form to fill out how do you fill it out what do you gotta do?

Ellen Campbell: The receipts are essential. Without the receipt, I'm not sure you could even get the credit. But -- then there's also a form, the state of Arizona has a form 301 that is got to be attached to the return and that is just the summary, an accumulation form. There's other forms that have to be hooked on. So it's complicated if you do it yourself, but well worth it because as we discussed, you can get more than your money back. If you are able to itemize on the federal return, schedule A, where you put your mortgage, if you can do that, or use that, you take these deductions to that form and deduct them on the federal return after the state has given all your dollars back. That's a good deal.

Ted Simons: So basically what you're saying is, and I think we discussed this on the program a couple of times as well, the federal return is tied to the state return.

Ellen Campbell: Absolutely.

Ted Simons: There are other things as well. We just don't have time as far as the litany of things you can look for as far as credits and deductions and such. Are these time sensitive things, things people need to figure out as far as get it done now or you lose it?

Ellen Campbell: Yes. You must make these donations by the last day of the year. And you -- to be deductible on this 2010 tax return. So if you don't have money in December, go ahead and make the deduction any time during the year, but know the credit will work for you in 2011.

Ted Simons: OK. Last question, real quickly, what is an enrolled agent?

Ellen Campbell: We're licensed by the department of treasury to represent taxpayers before the internal revenue Service and the state agency. We're licensed demonstrating that tax proficiency that we know tax law.

Ted Simons: Good information. Thank you so much for being here. We appreciate it.

Ellen Campbell: You're welcome.

Ellen Campbell:Enrolled Agent;

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