Arizona provides individual income tax credits for contributions made to certified School Tuition Organizations (STOs). These credits allow taxpayers to reduce Arizona state income tax liability for qualifying donations made to STOs, which then provide tuition assistance to eligible students attending private schools.
The STO credit system consists of multiple credit categories under Arizona law, each subject to specific statutory limitations, eligibility requirements, and filing procedures.
Eligibility and Forms
Arizona Form 323:
- Used by individual taxpayers to claim the Credit for Contributions to Private School Tuition Organizations (Individual). This is the primary credit for qualifying monetary contributions made directly to certified STOs, subject to annual statutory limits.
- Form 323 is the original STO credit.
- Form 348 is an additional credit that may be claimed only after the taxpayer first claims the maximum allowable Form 323 credit for the current year (unless claiming only a prior-year carryforward).
Arizona Form 348:
Used by individual taxpayers to claim the additional credit for contributions to certified School Tuition Organizations beyond the standard Form 323 limitation, subject to separate statutory caps and requirements under Arizona law.
Refundability
The STO credits are nonrefundable. This means:
- The credit may reduce Arizona income tax liability to zero
- Any unused portion of the credit cannot be refunded
- Carryforward provisions apply only if specifically allowed under the applicable STO credit category and tax year rules
How to Qualify
To qualify for the Arizona STO credit, taxpayers must:
- Make a contribution to a certified School Tuition Organization approved by the Arizona Department of Revenue (AZDOR)
- Ensure the contribution complies with annual statutory limits applicable to Form 323 and/or Form 348
- Retain proper documentation substantiating the donation
- Properly file Form 323 and/or Form 348 with the Arizona individual income tax return
Source:
PUB 707.pdf
Arizona Form 348
Arizona Form 323
Disclaimer: Always verify details with the official Arizona Department of Revenue forms and instructions, as tax rules may change. For complex situations, consult a CPA or tax professional.