Once Again, It's Arizona Tax Credit Time
It’s time again to remind readers of this humble blog of the whacked-out Arizona tax laws which make it exceedingly easy to make several types of charitable donations--at least for relatively well-off taxpayers. Of course, you should be giving to charity anyway. But in Arizona, we make it really easy even for die-hard libertarians (a euphemism for “the obnoxiously and ideologically cheap”) to act charitably.
Several tax credits let you reduce your state income taxes by the entire amount of your donation. This discussion, as always, assumes you itemize deductions and don’t pay alternative minimum tax (AMT). If so, donate by December 31, then in April, you pay that same amount less in state income taxes by the amount of the donations due to several dollar-for-dollar tax credits. All it costs you is some time (and some stamps for those where you can’t or don’t give online).
First, contributions to “private school tuition organizations” that offer scholarships to private schools qualify for a tax credit for individuals of up to $500 and for married couples up to $1,000. Please consider giving to Schools With Heart Foundation, 1131 E. Highland, Phoenix, AZ 85014 or donate online here. Designate your contribution for The Family School, which (in addition to getting our annual contribution) is the site of our youngest son’s Eagle Scout project; he and his Scout buddies painted the school 3 years ago. Schools With Heart is one of the better PSTOs; it doesn’t let donors earmark for specific children, doesn’t spend money on insiders, and isn’t violating the Internal Revenue Code rules on charitable organizations like numerous Arizona PSTOs. With The Family School, you don’t have to hold your nose when you write your check.
You contribute now, then report your contribution on Form 323 when filing state income taxes in April, getting a full dollar-for-dollar credit up to the cap. But make sure to include these donations as charitable contributions on your federal return to get the full benefit.
Second, this being Arizona, there's a less-generous public school tax credit lets single taxpayers give and get back up to $200, and married taxpayers, up to $400. You write the check directly to the school, not to a PTO or foundation, and report this credit on Arizona Form 322.
Of course, wealthier school districts benefit more from these tax credit donations, so if you want your money to make more of a difference, you should contribute to the Isaac School District, 3348 W. McDowell Road, Phoenix, AZ 85009. You can download the contribution form, or call Sophia L. Flores (602) 455-6774. Your gift is far more significant in a school district with (last time I checked) 90 percent of its students at or below poverty and two-thirds from non-English-speaking homes.
Third, donations to charities which assist low-income residents qualify for another tax credit if you exceed the “baseline” of your charitable contributions for 1996 or the first year you itemized, if later. Lots of Arizona charities qualify for this Form 321 credit (the list for 2010 is here, and you may already have donated to one of these organizations). This particular credit is available up to $200 for single taxpayers and $400 for couples.
But if you haven't made a qualifying donation yet, I serve on the board, and having disclosed that can urge you, without any guilt whatsoever, to contribute to Devereux Arizona and its behavioral health programs. Devereux’s “My Little Stocking” program provides holiday gifts to children in foster and residential programs who otherwise wouldn’t get anything without contributions like yours. You can give gifts at no cost because you’ll pay exactly that much less in state income taxes. Send your check to Devereux Arizona, 11000 N. Scottsdale Road, Suite 260, Scottsdale, AZ 85254, or click here to donate to the program. You also can give to Devereux Arizona online and make your qualifying donation that way.
Additional information on these three tax credits, and links to the necessary Arizona tax forms, is available from the Arizona Department of Revenue’s tax credit page. However, the page hasn’t been updated to include two other available Arizona tax credits.
The first of these two “mystery” tax credits is the Arizona Military Family Relief Fund tax credit which, for tax years through 2012 only, allows individual (but not entity) taxpayers to claim $200 for single taxpayers or heads of households, and $400 for married couples filing joint returns, for MFRF donations. To claim the credit, you need a receipt from the Arizona Department of Veterans’ Services, and to give you a receipt, the ADVS needs your full name, address, and last four digits of your Social Security number. (The SSN numbers are required by law, A.R.S. §41-608.04(F).) The MFRF is also capped at $1 million a year, so you need to give before they reach the ceiling – if they do; as of last weekend, there were about a quarter of the way there. Send your contribution to MFRF, c/o Arizona Department of Veterans’ Services, 3839 N. 3rd Street, Suite 200, Phoenix, AZ 85012. The contribution form is here, or you can call ADVS at (602) 263-1837.
The same deal applies as with the other credits; you take the credit on your Arizona return, and make sure you include it in your charitable donations for deduction on Schedule A of your federal return, and the contribution is completely offset by the credit and deduction and costs you nothing.
Then there’s a fifth credit available, from Arizona’s voter-approved but endangered system publicly-financed state elections. This credit may not survive those judicial activists on the U.S. Supreme Court, but you can still write the checks in 2010 and pay less in state taxes in April. (However, it’s not a true dollar-for-dollar credit because contributions are not deductible for federal taxes.) The credit is now $640 for individuals and $1,280 for couples, or up to 20% (yes, that’s one-fifth) of your total state tax liability, whichever is greater. Send your contribution to Citizens Clean Election Fund, 1616 W. Adams, Suite 110, Phoenix, AZ 85007. There are no specific forms for this credit, either for the donation or for your Arizona tax return, where you instead list the credit directly on your Form 140. For more information, the CCEC website offers this page. You can’t designate the contribution for a particular candidate or party; instead, you’re limited just to supporting democracy in general.
So make some donations by December 31 and reduce your state taxes this coming April 15. Yes, it’s a series of bad laws, but you still can use it to do some good. And consider it useful training; learning how to make charitable contributions when they’re free is the first step toward training yourself to make them when they’re not.