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receive Oklahoma state income tax credits for donating to a scholarship granting organization (SGO) or an Education Improvement Grant Organization (EIGO). Tis act was created to allow Oklahomans an opportunity to assist children in receiving a better education – either through innovative educational programs or providing lower-income Oklahomans with affordable private K-12 education through accredited schools that meet a child’s learning needs. Here’s what you need to know about these
T programs:
Donors that wish to contribute to an EIGO or SGO can receive a tax credit on their Oklahoma income tax returns of 50% of their donated amount. If the donor is willing to commit to making an equal or larger donation for two consecutive years, the donor can receive a state income tax credit of 75% of the donated amount in each year. Te tax credits are limited based on the
taxpayer. An individual or single taxpayer is limited to $1,000 in tax credits on his or her tax return while a married filing jointly taxpayer has a $2,000 tax credit limit. A qualified business entity can receive a tax credit on its Oklahoma income tax return of up to $100,000. Additionally, if the qualified business entity (defined as a corporation, partnership, subchapter-S corporation or a limited liability company) passes its tax credits to its owners, the taxpayer is not subject to the $1,000 or $2,000 limitation of a single or married taxpayer.
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he Oklahoma Equal Opportunity Education Scholarship Act of 2011 allows individuals and businesses to
Under the Tax Cuts and Jobs Act of 2017
(TCJA), the tax law was changed to limit state and local taxes (SALT) to an amount not to exceed $10,000. Tis caused many high tax states to devise workarounds that would create state-run “charitable organizations” to allow taxpayers to donate funds designated for state services in return for state tax credits to lower a taxpayer’s state income tax below the $10,000 limit and recharacterize the payment as a
charitable contribution deduction. Tis quid pro quo attempt was met with the U.S. Department of the Treasury issuing temporary regulations in May 2018 that would reduce a payment to a state tax credit charitable organization by the amount of the tax credit received in return for the donation. In essence, if a donor received a dollar-for-dollar tax credit, there would be no charitable contribution deduction for that contribution. Tis created a problem for those organizations that use state tax credits to provide incentives in states that were attempting to assist families with affordable education, health care and other options to make a family’s life easier to navigate. Final regulations for this treatment of contributions to state tax credit entities was finalized on Aug. 12, 2019. Te final guidelines provide a safe harbor that, subject to certain limitations (including the SALT cap), allows individual taxpayers who itemize deductions to treat payments made in exchange for tax credits as payments of state or local taxes for federal income tax purposes. For example, a taxpayer pays $3,000 in state income taxes and $4,000 in property taxes. A gift of $2,700 is made to an EIGO/SGO, receiving
September/October 2019
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