Are you in Alabama? If so, you might have noticed an influx of requests from scholarship granting organizations (SGOs) eager to gain your support. But what are SGOs, and why should you consider donating to them? This article explores how your contribution can expand the educational opportunities available to Alabama students.
What are SGOs?
In 2013, the Alabama Accountability Act (AAA) rolled out a groundbreaking scholarship program aimed at empowering low-income students to choose the school that best fit their needs – whether public or private. SGOs are non-profit organizations authorized under the AAA to collect donations and provide scholarships to deserving students, opening doors to educational success.
The Tax Benefits to Individual Taxpayers
For individual taxpayers, contributions to SGOs are not tax deductible on federal or Alabama state income taxes. However, when you donate, you can claim a dollar-for-dollar credit on your Alabama tax return for your contributions to an SGO. This means that instead of your tax dollars going straight to the state, your dollars can directly support the educational journey of individual students. Starting in 2022, individual Alabama taxpayers can claim up to $100,000 in credits. If you have unused credits, you can carry them forward for up to 3 years!
The Tax Benefits for Businesses – Multiplied
If you operate an Alabama partnership or S-corporation, your contributions to SGOs still provide tax benefits. Contributions from partnerships and S-corps result in credits that flow directly to the partners or shareholders, while C corporations can claim a credit equal to 100% of their tax liability. Plus, businesses do enjoy a federal tax deduction for these contributions. It’s a win-win!
How to Make Contributions to SGOs
First, set up a My Alabama Taxes (MAT) account with the Alabama Department of Revenue. Once your account is active, log in and reserve your credit by specifying the amount you wish to contribute and the SGO you are supporting. Then, send your funds to the SGO. You must send the funds to the SGO within 30 days of reserving the credit. For more information on this process, read this blog.
Credit Availability Limitations
The AAA sets an annual cap of $40 million for credits, awarded on a first-come, first-serve basis. So, if you want to earn credits and make an impact in students’ education, don’t wait too long!
Donate to an SGO and Provide an Educational Opportunity
By contributing to SGOs, you’re not just donating; you’re investing in the future of Alabama’s youth. Your generosity transforms lives and shapes a brighter tomorrow. For more information and personalized assistance with how to utilize the credits on your tax return, connect with an Aldridge Borden - OneSource professional.