See the following practical examples with descriptions below to find out how the tax credit actually works with your state tax liability. Please consult your tax advisor for more information.
| State Tax Information |
The Brown’s | The Smith’s | Ms. Jones | Mr. Johnson |
|---|---|---|---|---|
| Status | Married Couple | Married Couple | Single Taxpayer | Single Taxpayer |
| Tax Liability | ($1,100) | ($900) | ($825) | ($825) |
| Withholdings Paid | $1,250 | $900 | $825 | $0 |
| Net Tax Liability | $150 | $0 | $0 | ($825) |
| Tax Credit Contribution | $1000 | $1000 | $500 | $500 |
| Refund from AZ | $1,150 | $900 | $500 | $0 |
| Taxes Due to AZ | $0 | $0 | $0 | ($325) |
| Carry Forward | $0 | $100 | $0 | $0 |
Scenario 1 – The Brown’s
The Brown’s are a married couple who have a tax liability of $1,100. They have withheld $1,250 from their paychecks during the year so they should already be receiving a $150 tax refund. If they make a $1000 tax credit contribution, they have now paid in a total of $2,250 ($1,250 to AZ, $1000 to APESF), therefore they will receive a $1,150 tax refund when the file their taxes the following year.
Scenario 2 – The Smith’s
The Smith’s are a married couple with a tax liability of $900. They have withheld exactly $900 from their paychecks so they have fulfilled their tax obligation for the year. If they make a $1000 tax credit contribution to APESF (the maximum allowed for married taxpayers), they will only receive a $900 refund and they can carry forward $100 to the next tax year.
Scenario 3 – Ms. Jones
Ms. Jones is a single taxpayer who has a tax liability of $825. She has withheld exactly $825 from her paycheck therefore she has fulfilled her tax obligation for the year. If she makes a $500 tax credit contribution, she will receive a $500 refund.
Scenario 4 – Mr. Johnson
Mr. Johnson is a single taxpayer who has a tax liability of $825. He has paid nothing to the state during the year. If he makes a $500 tax credit contribution to APESF his tax liability will be $325 at the end of the year.
For this and all other matters affecting your tax planning, please contact your tax advisor for more information.