As we enter the fourth quarter, it’s a great time to think about additional ways to limit your tax liability for the year. A great way to do so is through giving vehicles. Here are two options you may want to consider:
Georgia Private School Tax Credit
Through the Georgia Private School Tax Credit law, you can redirect your – or your organization’s – Georgia tax dollars to the private school of your choosing, which also provides a federal income tax deduction.
The Georgia Private School Tax Credit law allows eligible private citizens and corporations to receive a dollar-for-dollar Georgia income tax credit, as well as a federal charitable contribution deduction for donations to non-profit student scholarship organizations (SSOs). SSOs provide student scholarships to parents of eligible children who plan to attend private schools. The law allows for tax-credit donors to designate the school of their preference to receive the tax-credit contribution monies through their chosen SSO.
The tax credit amount that donors can take is limited to their tax liability or actual donation amount, whichever is less. Each calendar year, the maximum amount that donors can contribute in exchange for a Georgia private school tax credit is:
- $2,500 for a married couple filing jointly
- $1,000 for an individual filing singly
- $10,000 for members of limited liability companies, shareholders of S corporations, and partners in partnerships, so long as they would have paid Georgia income tax in that amount on their share of taxable income
- Up to 75% of their annual Georgia income-tax liability for C corporations
If you’d like to participate, you need to act quickly though. The law limits the total private school tax credits to $58 million statewide, which will likely be consumed within the first few days of January 2015. Determine which SSO administers the program for your school of preference and apply now for pre-approval. Most SSOs have an online paperless application. To get started, view the non-profit SSOs in Georgia.
Another popular giving vehicle is a donor-advised fund. Established at a public charity, it allows you to combine the most favorable tax benefits available with the flexibility to support your favorite charity at any time.
There are three basic steps for utilizing a donor-advised fund: making a contribution of personal assets, placing them into a donor-advised fund account where the contribution can be invested and recommend grants from your account to qualified charities. The example below highlights the steps for Fidelity’s Giving Account®:
- Give – make a tax-deductible contribution to Fidelity Charitable of $5,000 or more
- Grow – determine how to invest your contributions, which gives the assets the potential to grow tax free
- Grant – recommend grants to the charities you support, with the option of being recognized or remaining anonymous
You may be eligible to take an immediate tax deduction for each contribution. By contributing securities with unrealized long-term capital gains directly to your donor-advised fund, you can give more to charity and enjoy significant tax savings. Additionally, recordkeeping is easier because you aren’t required to keep receipts for each contribution to a charity; instead, you receive a confirmation for the contribution to your donor-advised fund that serves as your tax receipt. Once you contribute to a donor-advised fund for any IRS-qualified public charity, you can recommend grants online, over the phone, via fax or by mail. The minimum grant recommendation is $50.
If you’d like to learn more about the Georgia Private School Tax Credit law or donor-advised funds, contact your Redwood Wealth Management advisor .
Brian Huey, CFP®
Senior Wealth Manager