Arizona Tax Credit Roundup Redux

It's time again (the now-traditional first Sunday in December) for the annual Arizona tax credit column. Those of you living in other places can skip directly to the last two paragraphs; they need blood where you are, too. If you want to see how it looked in the newspaper, the link is here.

'TIS THE SEASON TO LET GENEROSITY LOWER YOUR TAXES
East Valley Tribune, Dec. 5, 2004

In Arizona, December doesn’t just mean colder (by our standards) weather, holiday shopping, and the Cardinals getting mathematically eliminated from the playoffs. It’s also your last chance to take advantage of Arizona’s lengthy menu of state income tax credits, loopholes that let you be a hero -- at no net cost. That assumes you’re in the upper strata of taxpayers itemizing deductions and aren’t subject to Alternative Minimum Tax, but if so, take advantage of bad public policy to do some good.

First, there’s a credit against state income taxes for donations to “private school tuition organizations.” Whatever you contribute, up to $625 for married couples filing jointly or $500 for individuals, lowers your state income tax bill.

The Arizona Department of Revenue website lists some PSTOs, but I recommend Schools With Heart, 1131 E. Highland, Phoenix, AZ 85014; designate your check for the Family School, a unique school serving children from diverse backgrounds.

Second, as part of the political deal that created the PSTO credit, taxpayers also got a separate-but-not-equal credit for public school contributions. Couples can give and get back up to $250, or $200 for individuals. You must write the check directly to the school, not to a PTO or foundation, then you’ll pay that much less in taxes in April.

Given tight school financing and the rapid increase in activity fees, parents with kids in school probably already hit the limit. But if you haven’t donated yet this year, consider a gift to the Isaac School District, 3348 W. McDowell Road, Phoenix, AZ 85009.

Isaac receives far less (about $3 per student) in tax credit donations than do wealthier suburban districts like Mesa (about $35) and Scottsdale (about $60). The tax credit system is a perfect example of a government program that takes money from the lower half of taxpayers (who can’t itemize) and gives it to the upper half of taxpayers -- and whose schools don’t face nearly the challenge that Isaac does, with the vast majority of its students (over 90 percent) at or below poverty level (over 90 percent) and in non-English-speaking homes (about two-thirds). You can make this “reverse Robin Hood” law somewhat less perverse by sending a check to Isaac by Dec. 31.

Third, donations to charities assisting the “working poor” qualify for another tax credit if you make an additional contribution above your “baseline” charitable giving. If so, Arizona will repay you up to $200, for both married and single taxpayers.

The ADOR Web site lists qualifying charities, but as a board member I can strongly recommend Devereux Arizona’s “My Little Stocking” fund, which provides holiday treats to children in foster care and residential or group home treatment programs. These kids and their families often can’t afford necessities, much less holiday gifts. Call Kelly Gonzales at (480) 998-2920 ext. 2105, or click here. If you’ve finished your holiday shopping and can do another good deed, call Kelly and volunteer to help wrap the presents on Dec. 23 or 24.

Fourth, help fund Arizona’s system of publicly-financed elections. Individuals can contribute up to $550 and couples filing jointly up to $1,100, or up to 20% of their state tax liability -- whichever is greater. Again, write this check by Dec. 31, then pay exactly that much less in state income taxes in April. Send your check to the Citizens Clean Election Fund at 1616 W. Adams, Suite 110, Phoenix, AZ 85007.

Contributions to charities and governments -- again, assuming you itemize, and ignoring potential AMT effects -- are deductible for federal taxes, so the alchemy of converting state taxes into credit-eligible donations won’t affect your federal tax liability.)

Finally, give something other than money: Blood. The holidays always seem to stretch supplies, so if you’ve always meant to donate but never seem to get around to it -- do it already. Call United Blood Services at (602) 431-9500, or go to www.bloodhero.com, to schedule an appointment.

Don’t let another year go by without taking full advantage of this crazy smorgasbord of credits (plus guilt-free cookies after donating blood). You live here, it’s the law, and you might as well play. Happy holidays!