Tax credit vs. tax deduction: what’s the difference?
Tax deduction
- A deduction lowers the income the IRS or state uses to calculate your taxes.
- Your actual savings depend on your tax bracket.
- Example: If you earn $50,000 and donate $1,000, your taxable income becomes $49,000. At a 22% tax rate, that saves you $220.
Tax credit
- A credit lowers your tax bill dollar-for-dollar.
- Much stronger than a deduction.
- Example: If you owe $500 in Arizona state taxes and donate $500 to a QFCO, your tax bill becomes $0.
- For 2026 donations, you can claim up to $632 (single) or $1,262 (married filing jointly) in QFCO tax credits.
In short:
- Deduction = partial savings (depends on your tax bracket).
- Your actual savings depend on your tax bracket.
- Tax Credit = full savings (every dollar reduces your tax bill).
- And more: Tax payers can claim QCO, education and other tax credits in addition to the QFCO tax credit.
Thanks to the QFCO tax credit, you can donate up to $1,262 and get it back on your AZ tax return:
Step 2
File your tax return and claim the QFCO tax credit (in addition to other tax credits).
Step 3
Receive your tax credit! ($632 for single file or $1,262 if married and filing jointly)
QFCO
QFCO stands for Qualifying Foster Care Charitable Organization.
In Arizona, the Department of Revenue has certified certain nonprofits that serve children living in foster care as QFCO. When a taxpayer donates to a QFCO, they can claim the Arizona Foster Care Charitable Tax Credit on their state taxes. Donations to a QFCO are eligible for a dollar-for-dollar tax credit (not just a deduction).
Tax payers can claim QFCO tax credits in addition to other Arizona tax credits such as Qualified Charitable Organizations (QCO), schools, etc.
This means that you can donate the full QFCO amount ($632 if single or $1,262 if married and filing jointly for 2026) to Voices for CASA Children in addition to any QCO donation and you’d receive an Arizona Tax Credit for BOTH the QFCO and QCO donations!
Our QFCO Code is 10010.
A new tax benefit starting in 2026
Beginning with donations made in tax year 2026, a new federal law makes it easier for everyone to save on taxes while giving to the causes they love.
What’s changing?
- Until now, only tax payers who “itemized” their taxes could claim a deduction for charitable giving.
- Starting in 2026, all donors can deduct their contributions — even if they take the standard deduction.
How it works
- Deduct up to $1,000 if you file as an individual.
- Deduct up to $2,000 if you file jointly with your spouse.
- Applies to all your charitable giving (cash or goods) in a year.
Why this matters
- Your generosity goes further. Every dollar you give helps children living in foster care and lowers your tax bill.
- Giving is now for everyone. Whether you give $25 or $1,000, you may see a benefit at tax time.
- Plan ahead. If you’re a regular donor, you may want to think about how to spread your donation out into monthly increments or consolidate your giving to make the most of this new opportunity.
What you can do now
- Use the Arizona QFCO credit for your 2026 donations
- Plan early for Tax year 2026. Starting that year, you’ll be able to deduct up to $1,000/$2,000 in giving on your federal taxes, even if you don’t itemize.
- Remember: every gift you make continues to bring hope so youth can thrive.
