Insights & News

June 2015
Tax Planning

Open Your Heart, Donate, Get a Tax Deduction, and a Tax Credit



“Your chest is not big enough for your heart.” – Wes Moore

Wes Moore was born in Baltimore and he was the keynote speaker at the Leadership Howard County Big Event on April 21, 2015.  He is also the author of two books, The Other Wes Moore and The Work: My Search for a Life That Matters. During his keynote address he praised a colleague with the quote above.  This is the type of compliment we all hope to earn.

In the U.S., most people donate time, talent, and money out of the goodness of their heart. To encourage donations, the federal, state, and local governments provide tax deductions for contributions to qualified charities and nonprofits.  Although not well known, most Maryland individuals and companies are eligible for an income tax credit equal to 50% of the value of money, goods, or real property contributed to select non-profits.  Contributions of $500 or more are eligible for this credit.  (Note – a tax deduction is a reduction to taxable income and a tax credit is a reduction of income tax.)

The Maryland Community Investment Tax Credit (CITC) is available to Maryland residents and businesses in Maryland that are subject to state income tax.  This credit is part of a state program to assist communities with revitalization efforts.  Nonprofits apply to the Maryland Department of Housing and Community Development for funds available for the CITC program. By donating to a non-profit that has been awarded a CITC allocation, the donor will receive a tax credit.  

Here is an example using a $5,000 contribution:

Description

Tax Rate*

Deduction $

 

Federal Deduction

30%

$1,500

 

State Deduction

8%

$400

 

State Credit

50%

$2,500

 

Total Tax Reduction

 

$4,400

 

*Tax rate varies per individual and company. Other limits may apply, consult your tax advisor prior to your contribution to understand your tax benefit.

In this case, the taxpayer made a $5,000 contribution and the donor’s income taxes were reduced by $4,400.  The non-profit received the full $5,000.  

Individuals and businesses making donations are required to complete a two-page “Certification of Contribution for Tax Credit” form and send it along with the contribution to the non-profit.

For a list of nonprofits by county that are eligible for the CITC, visit Give Maryland. Currently in Howard County, the Community Action Council of Howard County and Linwood Center are eligible for the CITC credit.

If you have not made your charitable giving list for 2015, now is a good time to make your heart a little bigger.  Nonprofits awarded CITC funds have a limited amount available and donors receive a CITC on a first come, first served basis.

If you have questions regarding the CITC, investments, or financial planning, contact Mark Stinson at 410-715-9200 or mstinson@investfai.com.


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