Tax Credit Opportunities

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There are four different ways that parents can use tax credits to help defray the tuition costs at St. Michael’s. All Tax Credit funds must be channeled through School Tuition Organizations, or STO’s. There are currently over 70 STO’s in Arizona that all have different constituencies and policies. It is important to note that Arizona law prohibits parents from using their own personal tax credit to benefit their own children. This means that you can’t apply your tax credit to your own child, and you may not direct it in any way that will even indirectly benefit your child. Hopefully the following information will help you understand some of the most pertinent options available to you.

Your Personal Tax Credits

St. Michael’s asks that all parents direct their personal tax credits to the Arizona Episcopal School Foundation (AESF) with a designation that their funds go to St. Michael’s School. Your donation may be made at the AESF website. By increasing these funds, and hence increasing the size of the student body, St. Michael’s is able to keep tuition low for all students.

St. Michael’s Direct Tax Credit Assistance

Each year St. Michael’s takes the Tax Credits received from parents and friends of St. Michael’s and allocates them, based on demonstrated financial need, to St. Michael’s students. The school’s policy is to require any recipient to pay whatever portion of the tuition they can reasonably afford and then have tax credits make up the difference. Learn more about financial aid.

General Funds STO’s

Some STO’s have policies of helping students from any school and are generally based on financial need. Once a family gets accepted by these STO’s there is a high probability that they will be assisted for years into the future as long as their child continues to attend a private school and their financial situation does not dramatically change. Examples of these STO’s include:

Arizona School Choice Trust
AAA Scholarship Foundation

Donor Directed Tax Credit STO’S

Finally, a small group of STO’s have expanded their policies to allow donors to direct their credits not only to specific schools, but to specific students within those schools. Therefore, friends, relatives, business colleagues, etc., can be contacted by you and encouraged to direct their tax credits to your children without any restriction regarding the financial needs of the child. This is an excellent method for middle income families to receive help even though they might not qualify for straight needs based assistance. Examples of these STO’s include:

Arizona Tuition Connection
Institute for Better Education

Tips on Using Tax Credits

Tax Credits can be a very complicated issue for both the donor and the recipient. Arizona law has developed several ways to donate, made the allowable limits different for couples and individuals, and made the carryover provisions somewhat difficult to understand. The following tips are helpful in trying to take maximum advantage of these credits:

  1. The amount that can be claimed each year is not limited by the amount that is due on April 15, but on the total tax liability for the year. If a couple has paid $2,000 in tax withholdings during the year and only owes $100 on April 15th, they can make a $2,000 contribution to an STO and claim it on their return. They would then not be responsible to pay the $100, and would receive an additional $1,900 refund after their filing.
  2. Contributions to STO’s can be made up until April 15th for the previous tax year.
  3. Many STO’s accept credit card payments. Therefore, if timed properly, the donation can be made with no out of pocket expense. By the time the credit card comes due the refund has been received back from the state and can be used to pay off the credit card.
  4. Most computerized tax filing programs (including TurboTax and FreeTaxUSA) have the Arizona tax credit built into their programs and no special effort is needed to obtain your refund.
  5. Some STO’s have extensive marketing assistance to help you raise funds through friends and family. The Arizona Tuition Connection is very good at this and information on how to get started is on their website.