Arizona tax payers using QCD

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Topic Author
Almost there
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Location: Arizona USA

Arizona tax payers using QCD

Post by Almost there »

My federal income taxes are reduced because I had a QCD issued for $300 in 2023 for a valid 501c3 charity.

Can I use that same $300 for the same charity as an Arizona tax deduction also?

Almost there
Silk McCue
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Re: Arizona tax payers using QCD

Post by Silk McCue »

For what it’s worth - back in 2018 respected member Alan S said yes.

viewtopic.php?p=3693982#p3693982
Alan S. wrote: Sun Dec 31, 2017 8:35 pm I agree that you could use a QCD and claim an AZ tax credit for it. The form of the contribution must be in cash, which is what a QCD check is.

You must have to be sure to contribute to a qualifying organization. See AZ Pub 710. You also have to fill out the applicable credit Form such as 321 and 301. There is some interesting flexibility allowed as well.

For example, if you reached 70.5 to the day by the 4/17/18 federal tax due date, you could do a QCD to the approved AZ charity and actually claim the credit on your 2017 AZ return and the QCD would count toward your 2018 RMD because the distribution was made in 2018 after you reached 70.5. There are also carry forwards of the credit if you contribute more than the annual credit allowance.

You don't even have to adjust your AZ itemized deductions from federal Sch A because you cannot deduct a QCD on Sch A anyway. Remember, that your first IRA distribution in 2018 counts toward your RMD, so generally you should do the QCD first to be sure your RMD does not get completed before the QCD distribution.
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celia
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Re: Arizona tax payers using QCD

Post by celia »

I don't know how Arizona income taxes differ from other states, but if you are using TurboTax or H&R Block tax software and have downloaded the associated state module that goes with the federal, it will automatically know how to handle it. Just be sure, you read (and understand) and answer the interview questions in the "IRA withdrawals" section of both the federal and state sections.

The odds are that the state will not tax it, just like the feds don't, because the federal return subtracted the $300 from the taxable part of your withdrawal.

If the $300 was used as a QCD, it can't also be a charitable deduction, because it was already excluded from your Taxable Income.
Alan S.
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Re: Arizona tax payers using QCD

Post by Alan S. »

Silk McCue wrote: Sun Feb 11, 2024 8:10 pm For what it’s worth - back in 2018 respected member Alan S said yes.

viewtopic.php?p=3693982#p3693982
Alan S. wrote: Sun Dec 31, 2017 8:35 pm I agree that you could use a QCD and claim an AZ tax credit for it. The form of the contribution must be in cash, which is what a QCD check is.

You must have to be sure to contribute to a qualifying organization. See AZ Pub 710. You also have to fill out the applicable credit Form such as 321 and 301. There is some interesting flexibility allowed as well.

For example, if you reached 70.5 to the day by the 4/17/18 federal tax due date, you could do a QCD to the approved AZ charity and actually claim the credit on your 2017 AZ return and the QCD would count toward your 2018 RMD because the distribution was made in 2018 after you reached 70.5. There are also carry forwards of the credit if you contribute more than the annual credit allowance.

You don't even have to adjust your AZ itemized deductions from federal Sch A because you cannot deduct a QCD on Sch A anyway. Remember, that your first IRA distribution in 2018 counts toward your RMD, so generally you should do the QCD first to be sure your RMD does not get completed before the QCD distribution.
Cheers
Ah, but things have changed since then, probably a couple times.

viewtopic.php?p=7564409#p7564409
Silk McCue
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Re: Arizona tax payers using QCD

Post by Silk McCue »

Alan S. wrote: Sun Feb 11, 2024 10:25 pm
Silk McCue wrote: Sun Feb 11, 2024 8:10 pm For what it’s worth - back in 2018 respected member Alan S said yes.

viewtopic.php?p=3693982#p3693982
Alan S. wrote: Sun Dec 31, 2017 8:35 pm I agree that you could use a QCD and claim an AZ tax credit for it. The form of the contribution must be in cash, which is what a QCD check is.

You must have to be sure to contribute to a qualifying organization. See AZ Pub 710. You also have to fill out the applicable credit Form such as 321 and 301. There is some interesting flexibility allowed as well.

For example, if you reached 70.5 to the day by the 4/17/18 federal tax due date, you could do a QCD to the approved AZ charity and actually claim the credit on your 2017 AZ return and the QCD would count toward your 2018 RMD because the distribution was made in 2018 after you reached 70.5. There are also carry forwards of the credit if you contribute more than the annual credit allowance.

You don't even have to adjust your AZ itemized deductions from federal Sch A because you cannot deduct a QCD on Sch A anyway. Remember, that your first IRA distribution in 2018 counts toward your RMD, so generally you should do the QCD first to be sure your RMD does not get completed before the QCD distribution.
Cheers
Ah, but things have changed since then, probably a couple times.

viewtopic.php?p=7564409#p7564409
Thanks as always. I expected you would see the quoted post.

Cheers
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HueyLD
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Re: Arizona tax payers using QCD

Post by HueyLD »

Almost there wrote: Sun Feb 11, 2024 7:45 pm My federal income taxes are reduced because I had a QCD issued for $300 in 2023 for a valid 501c3 charity.

Can I use that same $300 for the same charity as an Arizona tax deduction also?
See this IRS instructions.

https://www.irs.gov/newsroom/final-regu ... ax-credits
Alan S.
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Re: Arizona tax payers using QCD

Post by Alan S. »

Almost there wrote: Sun Feb 11, 2024 7:45 pm My federal income taxes are reduced because I had a QCD issued for $300 in 2023 for a valid 501c3 charity.

Can I use that same $300 for the same charity as an Arizona tax deduction also?

Almost there
Basically, No.

A QCD is disqualified if the taxpayer receives ANY benefit from the QCD and the IRS has ruled that a state tax credit is treated as a benefit. There is an exception if the benefit does not exceed 15% of the donation, but the AZ credits are generally 100% up to a specified limit for each type of qualifying charity.

To simplify this, your state tax credit would be 300 which is 100% of your donation, therefore you could not report this as a QCD if you claimed the state tax credit, but you could if you did not claim the AZ tax credit.

It should also be noted that qualifying AZ charities for the credit are not as broad as federal Sec 170 charities, notably animal related organizations are not eligible for any AZ tax credit in the first place.
Topic Author
Almost there
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Location: Arizona USA

Re: Arizona tax payers using QCD

Post by Almost there »

Called the dept of revenue and was informed that I can use the $300 when doing my AZ taxes.
Walkure
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Re: Arizona tax payers using QCD

Post by Walkure »

Almost there wrote: Mon Feb 12, 2024 1:29 pm Called the dept of revenue and was informed that I can use the $300 when doing my AZ taxes.
The issue flagged by Alan S. above is that of course AZ will let you claim a tax credit for it, but that actually doing so will cause it to cease to be a QCD for federal purposes.
Topic Author
Almost there
Posts: 1125
Joined: Thu Jan 03, 2008 6:06 pm
Location: Arizona USA

Re: Arizona tax payers using QCD

Post by Almost there »

Thank you.

Almost there
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