Tax Incentives Are Not a Sin | Part Three

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Brian Cochran

Written By Brian Cochran, CFP®, Certified Kingdom Advisor® Financial Planner

Part 3 of a 3 Part Series

With this Insights, we conclude our reflection on tax season along our theme, Tax Incentives Are Not A Sin. In part one of this three-part series on tax reduction strategies, we explored ways you can save taxes by giving to others. Next, we turned our attention to strategies that help reduce taxes as you save for the future. In this third and final segment, we discuss a few unique and often overlooked opportunities to lower your total taxes.

New Mexico Affordable Housing Tax Credit

If you are a resident of New Mexico, you might be aware of the Affordable Housing Tax Credit. The state of New Mexico offers residents a credit of up to 50% for donations related to affordable housing. This is one way the state funds housing opportunities for low-income families. Keep in mind this is a credit and should not be confused with a deduction. The credit has a high ceiling of $500,000 and gifts of cash, land, services and buildings qualify. Eligible recipients of your gift include Habitat for Humanity and the Mortgage Finance Authority.  You may also benefit simultaneously from a charitable deduction on your federal tax return. The combination of the state credit and the federal deduction could provide a combined tax benefit of up to 90% of the value of your gift. I encourage New Mexico residents to discuss this opportunity with their tax advisor. 

Arizona Credit for Qualifying Charitable Organizations

The state of Arizona generously provides a tax credit for gifts to many charitable organizations. Much like the New Mexico Affordable Housing Tax Credit, Arizona residents receive the benefit of a credit against Arizona state tax and the charitable deduction for federal tax. The Arizona credit counts for 100% of your qualified charitable gift of up to $400 for individuals and $800 for those who file jointly. If you give to a qualifying foster care organization, the maximum credit is $500 for individuals and $1,000 for joint filers. To see a list of qualifying charitable organizations and foster organizations, visit the Arizona Department of Revenue.

Purchasing State Tax Credits

If you owe substantial New Mexico state taxes, consider purchasing tax credits from a tax credit broker. Tax credits are often for sale at a discount to their value, meaning you can pay $80-$90 for $100 worth of New Mexico credits. The credits are not valid forever, so you will want to be sure you can use the full credit before it expires. I recommend you work closely with your tax advisor and a qualified broker to be sure you purchase credits with terms appropriate for your situation.

Additional Credits

There are many more credits to consider. Federal credits are available for education, installing solar powerpurchasing an electric vehicle,  and adoption to name a few.

Together with a proactive financial advisor and a qualified tax professional, you can implement tax credits and deductions properly and with confidence. Contact John Moore Associates to learn more about how we help individuals and families understand and benefit from tax reduction strategies.

The information provided has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Brian Cochran and not necessarily those of Raymond James. Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. While we are familiar with the tax provisions of the issues presented herein, as Raymond James financial advisors, we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection of or use of information regarding any website's users and/or members.

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