FAQ for Pass-Through Entities
'm a shareholder in an S-corp or Partnership (multi-member LLC, PC, etc), how much can I donate?
You have two options:
1) Each shareholder is allowed to receive a dollar-for-dollar state income tax credit for the amount of their GA state income tax liability, up to a maximum of $10,000. However, you'll be limited by the federal SALT (State and Local Tax) cap of only a $10,000 deduction on your federal taxes. If you pay more than $10,000 in state and local taxes, you'll also pay federal taxes on that amount above the SALT cap which can cost you thousands.
OR you can take advantage of HB 149:
2) S-Corps and Partnerships are allowed to file their GA state taxes at the entity level and claim up to 75% of their GA state income tax liability in tax credits through the Alyn Scholarship Fund. When this option is utilized, the income earned by the business entity will not be passed on to the shareholder(s) as the entity will pay the GA state taxes (like C-corps do). Since the individual shareholders aren't paying the taxes, the SALT cap limitation is negated.
Further, the IRS provides a safe-harbor for S-corps and multi-member LLCs, PCs (and C-Corps as well) to claim state tax credit donations as an ordinary and necessary business expense deduction on their federal taxes. Therefore, the entire amount of the state taxes paid (whether directly or in conjunction with tax credits) is deducted and shielded from additional federal taxation. This can result in huge savings.
The full amount of the tax credit through ASF can be deducted federally as a business expense?
Yes. In August, 2020, the IRS issued final regulations 2020-17393 making it clear that C-Corps along with specified pass-through entities (S-Corps and Partnerships) can claim state tax credit payments as an ordinary and necessary business expense.
Obtaining tax credits through ASF will reduce the federal taxes of specified pass-throughs.
I'm the owner of single-member LLC, PC or sole proprietorship, how much can I donate?
You're allowed to receive a dollar-for-dollar state income tax credit for the amount of their GA state income tax liability, up to a maximum of $10,000.
Additionally, the IRS has issued guidance that you can claim state tax credit donations as an ordinary and necessary business expense deduction on your federal taxes so long as it meets business use requirements.
I'm a shareholder in more than one pass-through entity, can I get the full tax credit for each of them?
That depends. If none of the pass-through entities utilize HB 149, then no. Shareholders are allowed a maximum of $10,000 in tax credits based on income from all pass-through entities combined.
However, if a shareholder is part of an S-Corp or Partnership that utilizes HB 149 to file their GA state income taxes at the entity level, the income from that pass-through is not passed on to the shareholder(s) since the entity will pay the GA state tax liability. In this instance, any taxpayer who is a shareholder in additional pass-through entities, income from those other pass-through entities that have not elected to pay their GA state income taxes at the entity level will be passed on to the shareholder(s) allowing each of them to donate up to $10,000 for the income earned from those other pass-through entities.
Example: Taxpayer 1 is a shareholder in S-Corp A and S-Corp B. HB 149 is utilized for S-Corp A and it pays 75% of its GA state income taxes at the entity level. Thus, the income from S-Corp A is not passed through to Taxpayer 1.
S-Corp B, however, does not pay the GA state income taxes at the entity level and the income from this business entity is passed through to Taxpayer 1. Based on the income derived from S-Corp B, Taxpayer 1 can claim up to $10,000 in tax credits through the Alyn Scholarship Fund.
What about my spouse? They're a shareholder in the pass-through entity too.
Each shareholder is allowed the maximum donation of $10,000. So your spouse can donate $10,000 and you may donate $10,000 separately. The paperwork submitted to the Dept. of Revenue is in the name of each individual donor.
I'm in a partnership with multiple owners. Can each of us donate?
Absolutely! Each owner is allowed the maximum donation of $10,000. The paperwork submitted to the Department of Revenue is in the name of each individual donor.
However, per HB 149, Partnerships will have the option to pay GA state income taxes as the entity level and claim up to 75% of the GA state tax liability in QEE tax credits through the Alyn Scholarship Fund. For partnerships that choose this option, the income earned by the partnership will not be passed to the individual partners as the entity will have already paid the GA state taxes owed.
How do I know how much I can actually donate?
All Georgia income, loss and expense from the taxpayer selected pass-through entity (or entities) will be combined to determine Georgia income for purposes of determining the tuition tax credit. The combined income will then be multiplied by 0.0575 to determine the amount of tax that was paid. The maximum amount that can be claimed as a tax credit is 5.75% of the Georgia income from pass through entity (or entities). Amounts above the 5.75% threshold may not be claimed in the current year.
How much Georgia income needs to be generated to be eligible for the full $10,000 tax credit?
A taxpayer’s Georgia income from pass through entities must be at least $173,913 to fully take advantage of the $10,000 tax credit ($173,913 x 0.0575 = $10,000).
Can I reduce my quarterly estimated tax payments by the amount I donate?
Yes you can. You are allowed to deduct 25% of your contribution amount from each of your quarterly payments.
Can the tax credit be carried forward?
While the tax credit is a non-refundable, if any portion of the tax credit that is not utilized can be carried forward for up to five years. However, if the amount of the tax credit claimed is above what the tax liability ended up being, the excess amount cannot be carried forward.
Can I choose to support more than one school with my donation?
Absolutely. Just make that notation during the Paperless Donation Process and designate how you'd like the funds to be divided and we'll honor your wishes.
You have two options:
1) Each shareholder is allowed to receive a dollar-for-dollar state income tax credit for the amount of their GA state income tax liability, up to a maximum of $10,000. However, you'll be limited by the federal SALT (State and Local Tax) cap of only a $10,000 deduction on your federal taxes. If you pay more than $10,000 in state and local taxes, you'll also pay federal taxes on that amount above the SALT cap which can cost you thousands.
OR you can take advantage of HB 149:
2) S-Corps and Partnerships are allowed to file their GA state taxes at the entity level and claim up to 75% of their GA state income tax liability in tax credits through the Alyn Scholarship Fund. When this option is utilized, the income earned by the business entity will not be passed on to the shareholder(s) as the entity will pay the GA state taxes (like C-corps do). Since the individual shareholders aren't paying the taxes, the SALT cap limitation is negated.
Further, the IRS provides a safe-harbor for S-corps and multi-member LLCs, PCs (and C-Corps as well) to claim state tax credit donations as an ordinary and necessary business expense deduction on their federal taxes. Therefore, the entire amount of the state taxes paid (whether directly or in conjunction with tax credits) is deducted and shielded from additional federal taxation. This can result in huge savings.
The full amount of the tax credit through ASF can be deducted federally as a business expense?
Yes. In August, 2020, the IRS issued final regulations 2020-17393 making it clear that C-Corps along with specified pass-through entities (S-Corps and Partnerships) can claim state tax credit payments as an ordinary and necessary business expense.
Obtaining tax credits through ASF will reduce the federal taxes of specified pass-throughs.
I'm the owner of single-member LLC, PC or sole proprietorship, how much can I donate?
You're allowed to receive a dollar-for-dollar state income tax credit for the amount of their GA state income tax liability, up to a maximum of $10,000.
Additionally, the IRS has issued guidance that you can claim state tax credit donations as an ordinary and necessary business expense deduction on your federal taxes so long as it meets business use requirements.
I'm a shareholder in more than one pass-through entity, can I get the full tax credit for each of them?
That depends. If none of the pass-through entities utilize HB 149, then no. Shareholders are allowed a maximum of $10,000 in tax credits based on income from all pass-through entities combined.
However, if a shareholder is part of an S-Corp or Partnership that utilizes HB 149 to file their GA state income taxes at the entity level, the income from that pass-through is not passed on to the shareholder(s) since the entity will pay the GA state tax liability. In this instance, any taxpayer who is a shareholder in additional pass-through entities, income from those other pass-through entities that have not elected to pay their GA state income taxes at the entity level will be passed on to the shareholder(s) allowing each of them to donate up to $10,000 for the income earned from those other pass-through entities.
Example: Taxpayer 1 is a shareholder in S-Corp A and S-Corp B. HB 149 is utilized for S-Corp A and it pays 75% of its GA state income taxes at the entity level. Thus, the income from S-Corp A is not passed through to Taxpayer 1.
S-Corp B, however, does not pay the GA state income taxes at the entity level and the income from this business entity is passed through to Taxpayer 1. Based on the income derived from S-Corp B, Taxpayer 1 can claim up to $10,000 in tax credits through the Alyn Scholarship Fund.
What about my spouse? They're a shareholder in the pass-through entity too.
Each shareholder is allowed the maximum donation of $10,000. So your spouse can donate $10,000 and you may donate $10,000 separately. The paperwork submitted to the Dept. of Revenue is in the name of each individual donor.
I'm in a partnership with multiple owners. Can each of us donate?
Absolutely! Each owner is allowed the maximum donation of $10,000. The paperwork submitted to the Department of Revenue is in the name of each individual donor.
However, per HB 149, Partnerships will have the option to pay GA state income taxes as the entity level and claim up to 75% of the GA state tax liability in QEE tax credits through the Alyn Scholarship Fund. For partnerships that choose this option, the income earned by the partnership will not be passed to the individual partners as the entity will have already paid the GA state taxes owed.
How do I know how much I can actually donate?
All Georgia income, loss and expense from the taxpayer selected pass-through entity (or entities) will be combined to determine Georgia income for purposes of determining the tuition tax credit. The combined income will then be multiplied by 0.0575 to determine the amount of tax that was paid. The maximum amount that can be claimed as a tax credit is 5.75% of the Georgia income from pass through entity (or entities). Amounts above the 5.75% threshold may not be claimed in the current year.
How much Georgia income needs to be generated to be eligible for the full $10,000 tax credit?
A taxpayer’s Georgia income from pass through entities must be at least $173,913 to fully take advantage of the $10,000 tax credit ($173,913 x 0.0575 = $10,000).
Can I reduce my quarterly estimated tax payments by the amount I donate?
Yes you can. You are allowed to deduct 25% of your contribution amount from each of your quarterly payments.
Can the tax credit be carried forward?
While the tax credit is a non-refundable, if any portion of the tax credit that is not utilized can be carried forward for up to five years. However, if the amount of the tax credit claimed is above what the tax liability ended up being, the excess amount cannot be carried forward.
Can I choose to support more than one school with my donation?
Absolutely. Just make that notation during the Paperless Donation Process and designate how you'd like the funds to be divided and we'll honor your wishes.