What happened to the federal deduction for tax credits?

On August 23, 2018 the IRS released new rules limiting charitable donations and state tax credits. Previously, when you made a donation that qualified for an Arizona dollar for dollar tax credit you received a state tax credit and a Federal charitable deduction. Taxpayer’s who make a donation after August 27, 2018 and claim an Arizona credit on their tax return will no longer be able to also claim the Federal charitable contribution for the associated donation.

Any donations made before Tuesday, August 28 get BOTH the federal charitable deduction and the Arizona $1 for $1 tax credit. Donations made after Monday August 27th still qualify for the Arizona tax credit but will receive NO Federal charitable deduction. 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. In light of this new regulation, tax credits are still a great opportunity to direct your tax dollars locally and receive a dollar for dollar offset for your contributions. See your tax preparer for details on how this change affects you.