Tax laws do affect behavior. You spend months worrying about declines in your investments, but in December, suddenly you're happy to "harvest" tax losses.
In Arizona, the tax laws encourage you to listen to year-end appeals for charitable donations. Of course, you should be giving to charity anyway. But in Arizona, we make it really easy even for die-hard libertarians (aka "the obnoxiously cheap") to become charitable - because it's free.
Several tax credits let you reduce your state income taxes by the amount of your donation. I'm assuming you itemize deductions and don't pay Alternative Minimum Tax. If so, donate by Dec. 31, then in April, pay the same amount less in state tax as you gave away. All it costs you is the stamp and the time to write the checks. And for most of these charities, you can contribute online and save the stamp.
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. For your PSTO contribution, please consider Schools With Heart, 1131 E. Highland, Phoenix, AZ 85014, or call (602) 252-5866, and designate your contribution for The Family School.
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, the 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, or at www.isaacschools.org/district/credit.htm. Your gift is far more significant in a school district with 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, which is available up to $200 for single taxpayers and $400 for couples.
I serve on the board, and having mentioned that can urge you without any guilt whatsoever to contribute to Devereux Arizona's behavioral health programs. Devereux serves children in foster and residential programs who won't get holiday gifts 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 go to www.devereuxaz.org and click on the "My Little Stocking" link.
A fourth credit may not be around much longer; a federal judge (who would be called an "activist" except that she's ruling the way the 'wingers want, which makes her a "patriot") seems likely to eviscerate Arizona's publicly financed state elections. But while it lasts, this tax credit is surprisingly generous, $610 for individuals and $1,220 for couples, or up to 20 percent 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, or visit www.azgu.gov/CleanElections/. For this credit, there's no separate form, you credit the donation on Form 140 itself.
Finally, after making your cash donations, give something else that you won't miss. Call United Blood Services at (602) 431-9500, or make an appointment online at www.bloodhero.com, to donate blood. Easy, fast, and the post-donation cookies are tasty and guilt-free, too.
So make some donations by Dec. 31 and reduce your state taxes on April 15. Yes, it's bad law, but please use it to do good.