Arizona State Tax Credits

More ways to save your hard-earned money from the tax man!

Arizona has some great State Tax Credits for you.

Thank you so much for checking our resource out here for your state and congratulations for taking a proactive step to paying less in taxes. For your state, we have identified the tax credits that are currently being offered to help you pay less in state taxes.

We hope this resource is helpful to you, and if there is something you feel we have missed, please let us know!

It would be completely arrogant of us to think that we know all things and if we missed something we want to know so we can vet that and help you and our other friends in the entrepreneurial community pay less in taxes! And if you found this helpful, you should check out our DIY resources inside of our Tax Savings Communities (found at www.MakeTaxesFair.com/Our-Communities).

We're also ready to help you if you want to skip the line of the DIY process and get help directly from us. To learn more about how we help our clients check out www.MakeTaxesFair.com/Get-My-Roadmap
Arizona

Arizona Corporate Tuition Tax Credit Program

Overview:
Arizona offers two corporate income tax credits for businesses that donate to Certified School Tuition Organizations (STOs). These STOs provide private school scholarships to low-income, disabled, or displaced students. Donations must be pre-approved and the credits are capped statewide annually, issued on a first-come, first-served basis.

Who It’s For:
Corporations, S corporation shareholders, corporate partners, and exempt organizations with UBTI that are subject to Arizona state income tax and wish to support private education through scholarship programs.

Four Key Highlights:

  1. Two Types of Tax Credits

    • Low-Income Credit (Form 335): For scholarships to low-income students (state cap: $135M).

    • Disabled/Displaced Credit (Form 341): For students with disabilities or displaced from homes (state cap: $6M).

  2. Pre-Approval Is Mandatory

    • Corporations must coordinate with an approved STO, which submits the donation request to the Arizona Department of Revenue (ADOR) for pre-approval. Direct corporate submissions are not accepted.

  3. Nonrefundable with Carryforward

    • Credits cannot exceed the tax liability and are nonrefundable, but can be carried forward for up to five years.

  4. Structured Donation Process

    • Steps include choosing a certified STO, obtaining pre-approval, making the donation, receiving documentation, and claiming the credit using Form 335 or 341 on the Arizona corporate tax return.

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Arizona Investment in Qualified Small Business Tax Credit

Overview:
This Arizona tax credit incentivizes individuals to invest in qualified small businesses (QSBs) that meet specific operational, employee, and industry requirements. Investors can claim a multi-year percentage-based credit on the amount invested, with higher incentives for rural and bioscience investments. While not available to corporations directly, it can be passed through to individual partners or shareholders.

Who It’s For:
Individual taxpayers (including those receiving a pass-through from partnerships or S corps) who invest in early-stage Arizona small businesses that meet specific eligibility requirements set by the Arizona Commerce Authority.

Four Key Highlights:

  1. Tiered Credit Based on Investment Type

    • Rural/Bioscience QSBs:

      • 12% per year (Years 1 & 2)

      • 11% in Year 3

    • Other QSBs:

      • 10% per year for 3 years
        Credit applies after the year of investment and is based on the amount invested.

  2. Strict Business Eligibility Rules

    • Must operate in Arizona, have at least 2 full-time resident employees, and less than $2M in total assets.

    • Excludes many industries: retail, real estate, professional services, financial services, and more.

    • No involvement in human cloning or embryonic stem cell research.

  3. Nonrefundable with 3-Year Carryforward

    • If the credit exceeds tax liability, the unused portion can be carried forward for up to three years.

  4. Claiming the Credit Requires Arizona Form 338

    • Individuals file Form 338 with their return.

    • Partnerships and S corps must complete Form 338 and Form 338-P or 338-S and provide documentation to partners/shareholders.

    • Available only for tax years from 2007 through 2024, unless extended by new legislation.

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Arizona Health Insurance Premium Tax Credit

Overview:
This Arizona tax credit program provides financial incentives to small businesses by reducing the cost of employee health insurance premiums. Health insurance companies apply the credit by lowering premiums for eligible small businesses that were previously uninsured, helping them offer coverage for the first time.

Who It’s For:
Small businesses operating in Arizona with 2–25 employees that have not offered health insurance for at least six consecutive months before applying.

Four Key Highlights:

  1. Credit Amount Based on Coverage Type

    • $1,000 per employee for single coverage.

    • $3,000 per employee for family coverage.

    • OR 50% of the total premium—whichever is less.

  2. Certificate of Eligibility is Critical

    • Must apply for and receive a Certificate of Eligibility before enrolling in a health plan.

    • Coverage must be obtained within 90 days of certificate issuance or eligibility is permanently lost.

  3. One-Time Participation Rule

    • Businesses have only one opportunity to participate.

    • Missing the 90-day window or switching providers mid-year forfeits any remaining credit.

  4. Limited Statewide Credit Pool

    • The total program cap is $5 million per year.

    • Credits are distributed first-come, first-served, with a waiting list system if funds are exhausted.

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