Today people still don’t understand the different between a tax deduction (we sometimes call this an above the line deduction) and a tax credit (we sometimes call this a below the line deduction) which is impacted by the line on your tax return we call taxable income. The important distinction is that a credit is a ‘true’ dollar for dollar reduction of your total tax. Whenever these types of tax programs are available, you should pay close attention to see if you can qualify and take advantage of the program. In the state of Georgia GOAL Scholarship Program, Inc. is something you need to look at closely as we kick off the new year.
In 2008, the Georgia General Assembly passed House Bill 1133 (HB 1133) and Governor Sonny Perdue signed it into law. The legislation was further amended in 2011 (HB 325) and 2013 (HB 283). The law provides for the creation of student scholarship organizations (SSOs) to which Georgia individual and corporate taxpayers can contribute in exchange for a state income tax credit and possible federal charitable income tax deduction. The SSOs use the contributions to award scholarships to students from K-12 public schools so that they can attend the private schools chosen by their parents. Georgia GOAL Scholarship Program, Inc. was the first SSOs to be recognized by the Georgia Department of Education. There are presently 120 participating schools in the state of Georgia. (source: goalscholarship.org)
Because there is a limited amount of tax credits available each year, a taxpayer who is interested in contributing to GOAL must express his or her intent to do so to the Georgia Department of Revenue (“DOR”). If there are still tax credits available, the DOR will inform the taxpayer to proceed with his or her contribution to GOAL. So that interested contributors are not burdened at all by this process, GOAL and our school make the pre-approval and contribution process very easy to complete.
Once approved, the taxpayer contributes to GOAL and designates our school as the place at which he or she would like the contribution to be used in providing scholarships to qualified students (who we recommend to GOAL at the time they apply to the school). Once the contribution is received, GOAL sends a notice to the taxpayer, who can then take an income tax CREDIT against their Georgia income taxes for the amount of their contribution made that year. In cases where the taxpayer itemizes his or her federal income tax deductions, a federal charitable income tax deduction may also be available for the amount of the contribution. Thus, if a married couple filing a joint return owes $6,000 of Georgia income taxes and makes the maximum contribution to GOAL of $2,500, they will only have to pay $3,500 ($6,000 less $2,500) of income taxes to the state of Georgia. GOAL provides very straightforward filing instructions to its contributors so that they know exactly how to claim the education expense tax credit on their Georgia income tax return. You may donate as little or as much as you want up to the following limits: $2,500 for a married couple filing jointly, $1,250 for married people filing separately, $1,000 for an individual filing singly, and $10,000 for an individual owner of a pass through entity. (source: goalscholarship.org)
What is really fantastic about this tax credit is if you owed $5,000 of GA state tax for example and made this $2,500 charitable donation, the credit would actually lower your state tax by $2,500 to a total owed of $2,500 (it may be slightly different if subject to AMT- AMT filers will earn up to 29% of their donation amount. Consult your tax advisor for clarification.). Remember, with a normal charitable contribution, you would generally have an above the line deduction which would be worth far less to you than the $2,500 GOAL credit. In addition, you get to take the $2,500 as a charitable contribution on your itemized deductions on your federal tax return.
If you want to get this credit, you will need to act FAST in the beginning of 2014! The approved tax credits in 2013 were all exhausted by May 9th of this year and over 1,000 people have already reserved their spot for 2014. Give us a call at www.oxygenfinancial.net or talk with The Cottage School to discuss getting your reservation for next year. My opinion is that the credits won’t last long!
For more information on this tax credit, call Oxygen Financial at 1-800-355-9318 or email [email protected] to schedule an appointment.
Written by:
Ted Jenkin
Request a FREE consultation: www.oxygenfinancial.net
