The maximum tax credit allowed is $2,500 for married filing jointly, $1,250 for married filing separately and $1,000 for single and head of household filers. Businesses are also eligible for the tax credit. The maximum credit allowed for the individual owner of an S-Corp, Limited Liability Company or partnership is up to $10,000, while C-Corps or trusts can donate up to 75 percent of corporation’s Georgia’s tax liability.
The tax credit allows donors to receive a dollar-for-dollar Georgia income tax credit for these gifts. Furthermore, taxpayers who itemize may take a charitable deduction for SSO contributions on their federal income tax returns. Even alternative minimum tax filers may earn up to 29 percent of their donation amount since charitable contributions are deductible, though state income taxes are not. If you generally receive a refund, your refund should increase by the amount of your donation to an SSO. If your contribution is more than your state income tax liability, the unused credit may be carried forward for five years.
The state limits the SSO donations each year. Therefore, you must obtain approval prior to taking a tax credit for the contribution by completing form IT-QEE-TP1 online through the Georgia Tax Center’s Self-Service Portal at www.gtc.dor.ga.gov. The window to apply for the tax credit opens Jan. 1. So, for the 2014 tax year, the Department of Revenue began accepting applications Jan. 1, 2014.
So how is this relevant now? Because the 2014 credit was exhausted by Jan. 22, 2014. It took only 22 days for Georgia taxpayers to claim the allotted $58 million in credits. If this is something you are interested in, now is the time to do your research and talk to your tax consultant. Some SSOs are accepting pledges for the 2015 tax year. The Georgia Department of Education’s website (www.gadoe.org/External-Affairs-and-Policy/Policy/Pages/Tax-Credit-Program.aspx) has a list of more than 30 SSOs to choose from. Many SSOs specialize in providing scholarships for low-income families, while other SSOs allow you to direct your contribution to a specific school, such as a school for special needs children.
Some SSOs will submit your information to the Department of Revenue on Jan. 1, 2015, in lieu of the taxpayer filing form IT-QEE-TP1 with the DOR individually. You will need to review the SSO’s individual website or contact them directly to find out if they are accepting pledges for 2015. If the SSO you are interested in is not currently accepting pledges, you and your tax consultant can find the necessary forms at the Georgia Department of Revenue website in January 2015. Once applications are submitted on or after Jan. 1, 2015, the DOR has 30 days to approve your contribution for the tax credit and will send you form IT-QEE-SSO1 to use when filing your tax returns. The DOR will send you the approval letter directly. Your contribution must be made within 60 days of the pre-approval notice, and within the calendar year in which the contribution was pre-approved.
William G. Lako, Jr., CFP®, is an Executive in Residence at Kennesaw State University’s Coles College of Business and a principal at Henssler Financial. Mr. Lako is a CERTIFIED FINANCIAL PLANNER™ professional.