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- How do you take a Federal deduction for a charity contribution that was taken as an AZ tax credit for 2020?
How do you take a Federal deduction for a charity contribution that was taken as an AZ tax credit for 2020?
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WAAZCPA2762
Level 1
03-27-2022
04:14 PM
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Taxpayer made a contribution to a qualifying AZ charity prior to due date in 2021 for a tax credit on their 2020 tax return. Software did not transfer the credit over to 2021 to take as a federal deduction. How do I enter it so it is included on the Federal itemized but not on the AZ itemized?
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4 Comments 4
qbteachmt
Level 15
03-27-2022
05:40 PM
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"prior to due date in 2021 for a tax credit on their 2020 tax return."
What due date? Which tax return?
And if there is already the use of a credit in 2020, are you asking about a carryover?
More details always help.
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sjrcpa
Level 15
03-27-2022
06:15 PM
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Can you take it as a federal itemized deduction?
The few that I have seen, you reduce the federal contribution deduction by the amount of the state credit. If client got a 100% credit there is no deduction.
The more I know, the more I don't know.
WAAZCPA2762
Level 1
03-27-2022
07:36 PM
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As I noted in my original post, the contribution was paid in 2021 but was taken as a tax credit on their AZ 2020 tax return. This is allowed. AZ has organizations that qualify for tax credits. contributions to these organizations can also qualify for a federal deduction. AZ further allows a credit for contribution paid before the due date of the return, but that contribution is not allowed for a federal deduction until the return for that year is prepared. So again contribution paid in 2021 but taken as a tax credit for state purposes in 2020 qualifies for a Federal deduction in 2021. And Yes, I know the amount is then deducted from itemized deductions for AZ. Lacerte generally has correctly applied this in the past, but I noticed for one of my clients it did not. If add the contribution to the Federal Schedule A it automatically transfers over to the AZ Sch A, and I do not see a way in the software to reduce the AZ schedule A for this. Does someone know how to do this correctly?
WAAZCPA2762
Level 1
03-27-2022
07:38 PM
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Yes, its allowed as a federal deduction for the year in which it was paid, but it does need to be deducted from the State Schedule A. I am not seeing where in the software this can happen. The software generally did this automatically if entered as a State credit the year before, but it somehow did not this time.
