By Kathy Barrett and Mike Sklar
Recently, the State of Georgia enacted a tax credit effective for 2008 that will allow many Georgia taxpayers a credit against Georgia income taxes as well as a deduction for Federal income taxes. The Georgia Private School Tax Credit law allows eligible private citizens and corporations to receive Georgia tax credits for donations to Georgia Student Scholarship Organizations (SSOs). SSOs also qualify as charitable organizations for IRS purposes, and will provide student scholarships to help cover the cost of a private school education for children in the state of Georgia.
Aside from the educational benefits to Georgia children, this credit can be very attractive to certain taxpayers. In cases where individual taxpayers are subject to the Alternative Minimum Tax (AMT), the donation to an SSO may provide combined federal and state tax savings greater than the amount actually contributed by up to $725. Taxpayers not in AMT may not recognize the full benefit of the credit.
Taxpayers will receive a dollar-for-dollar credit against Georgia income tax for approved donations up the following amounts:
- Single individual or head of household: Up to $1,000
- Married couple filing a joint return: Up to $2,500
- Corporations: Up to 75 percent of the Georgia income tax liability
For federal income tax purposes, the amount of the donation to an SSO qualifies as a charitable contribution allowing for a reduction in Federal income taxes. The amount of the contribution to the SSO must be added back to Georgia taxable income in order to be allowed to claim the Georgia credit.
There is a $50 million cap on the total amount of Georgia tax credits awarded each year. Therefore, the availability of the credits to taxpayers is on a first-come, first-served basis.
In order to qualify for the credit the following steps must be taken:
- Choose the SSO: Determine and contact the SSO of your choice to express your intent to contribute. The taxpayer ID for the SSO will be required to be entered on your application for pre-qualification.
- Get Pre-Qualified: Download and complete Georgia Form IT-QEE-TP1 (http://www.etax.dor.ga.gov/inctax/2007_forms/TSD_HB-1133_FORM_ITQEE-TP1.pdf). File this simple, two-page form with the Georgia Department of Revenue to pre-qualify your contribution to the SSO. The reason for this process is to make sure that the annual $50 million cap on Education Expense Credits has not been exceeded.
- Confirmation. The Georgia Department of Revenue will review your form and confirm that the $50 million yearly cap has not been exceeded. The Department of Revenue will then send you a copy of the approved Form IT-QEE-TP1. This will let you know that you can go ahead and make your contribution.
- Donate: After you receive your approved Form IT-QEE-TP1, your contribution to the SSO must be made within 30 days and before the end of the same calendar year that your donation was pre-approved. Along with your donation, you need to send a photocopy of the Form IT-QEE-TP1 to the SSO.
- Get Credit! The SSO will send you a confirmation Form IT-QEE-SSO1, which, along with the approved Form IT-QEE-TP1, you will need to attach to your state tax return in order to claim the Education Expense Credit. If you are an individual, you will not be able to e-file your Georgia return because of this required attachment.
If you have any questions regarding this new credit and how it will effect you, please feel free to contact Kathy Barrett at (404) 835-1923 or Kathy.Barrett@aghllc.com or Mike Sklar at (404) 835-1858 or Mike.Sklar@aghllc.com. |