PA Tax Credits
For both business and individuals, an incredible opportunity exists to assist DC by leveraging your donation dollars such that you literally can give $5,000 at a “cost” to you of only $500 (in other words, it costs a dime to give a dollar).
Pennsylvania has a program entitled Education Improvement Tax Credit, or EITC, which provides financial aid to students living in low-income households who attend an eligible recipient of a scholarship organization, like DC. (There is another program, the Opportunity Scholarship Tax Credit program, or OSTC, but we’ll refer to both as EITC as DC qualifies for both, and the tax benefits are exactly the same.) The program enables donors to contribute funds to a qualified scholarship fund and designate a school as to where the funds are to go. At the end of the year the scholarship fund issues a tax document (a form RK-1) for you to utilize in connection with the preparation of your PA tax return. Essentially, the program provides you a PA tax credit (i.e. a dollar for dollar reduction in your taxes) of 90% of the amount donated and “redirects” the tax dollars you otherwise would pay to the state to DC in support of qualifying students. It’s a fantastic opportunity to leverage your donation dollars!
Tax credits are available on a first-come, first-served basis, and individuals and businesses must complete a quick, single-page application each year to contribute.
- A business or individual that commits to make a contribution to DC for two consecutive tax years may receive a tax credit equal to 90% of its/his/her contribution.
- Tax credit applications for both individuals and businesses for the 2019 tax (calendar) year are now being accepted.
- Applications can be for first-time donors.
- Applications can be for renewal of commitments that have already been satisfied (e.g. if you committed to donate in 2017 and 2018 and have completed those donations).
- If you made a two-year commitment last year, you also may apply for another one or two-year commitment this year, even though you have another year to go from the original commitment; this can be useful in situations where your income level may have increased.
By making a gift to DC through the EITC program, businesses redirect their PA tax dollars to DC for financial aid. The application takes less than 10 minutes to complete. As described above, gifts under the program provide a significant benefit to students, and businesses also receive a tax credit for as much as 90% of the value of their gift in Pennsylvania State taxes.
While the EITC program was previously restricted to businesses, individuals may now participate and receive the same tax benefits as businesses for their donations (even individuals working for non-profit organizations). Essentially, participants can choose to send some or all of the tax dollars they would otherwise pay to the Commonwealth of PA to DC. Individuals donate to a special purpose (“pass through”) scholarship organization and receive the tax credit. DC currently utilizes the Central Pennsylvania Scholarship Fund to facilitate donor commitments and disbursements to the school.
Further details regarding the program for both businesses and individuals can be found by clicking the following link: SPE Tax Credit Reference Sheet.
- Assume you estimate that you will pay $5,000 in PA taxes in 2019 and roughly the same (or more) in 2020.
- You complete a form committing to donate, for example, $5,500 in 2019 and again in 2020 towards the EITC program. Your form will be forwarded by our Development Office to our EITC program manager.
- In December, you will send your check ($5,500) to the Development Office, which will send it to the EITC program manager (technically, your check is made out to the special purpose entity that is set up like a partnership).
- After the end of the year, you will receive a form to use for purposes of tax return preparation (form RK-1) documenting your $5,500 donation; this will generate a PA tax credit of ($5,500 x 90%) = $4,950, which will reduce your PA taxes to a mere $50 (vs the $5,000 you otherwise would have paid). The net cost to you of your $5,500 donation is only ($5,500 - $4,950) = $550.
- In essence, the tax dollars you otherwise would pay are redirected to assist DCin our efforts to provide affordable education!
During this fiscal year, DC Society Members and “friends of DC” already have made donations to DC through this program of $450,000, at a “cost” to them of only $45,000.
Interested? Or have questions??
- Contact Trisha Tuttle (firstname.lastname@example.org, or 610-353-6522, x2207) in the Development Office to get started!
- The form is simple and easy to complete (5 minutes).
- The program deadline will be sometime late summer or fall, but the earlier we submit program participation requests, the more assurance we have that we will secure the funds available (other schools are vying for the same dollars).