When discussing philanthropy with charitably inclined clients, we’ve added a sixth “T” to our shorthand list of the various strategies that one can employ (Time, Talent, Treasure, Ties, Testimony…and Tax credits).
The state of Missouri* allocates tax credits to nonprofits in a competitive application process. Nonprofits who are selected to obtain these allocations can then offer charitable tax credits to Missouri taxpayers who want to reduce their state tax liability and contribute to a charitable cause at the same time. Rules vary by program as far as what type of taxpayers are eligible to receive the credits as well as the ability to roll over these credits to subsequent years.
By way of illustration, state Neighborhood Assistance Program (NAP) Tax Credits provide assistance to community-based organizations that are implementing projects in the areas of job training, education, crime prevention, community services, and physical revitalization. Eligible taxpayers may receive 50% or 70% credits for making a qualified contribution to an approved NAP project. Donors eligible for NAP credits include businesses; individuals who operate a sole proprietorship, operate a farm, have rental property or have royalty income; or shareholders in an S-corporation, a partner in a Partnership, or a member of an LLC.
A few current examples, with accompanying math: Peter and Paul Community Services, a St. Louis-area nonprofit tackling homelessness, offers a helpful primer along with calculations showing how the NAP program benefits both the nonprofit and the donor. St. Louis Children’s Hospital offers NAP and Youth Opportunity Program (YOP) credits for donations of $1,000 or more to their Teen Outreach Program. YOP credits are available to individuals with tax liability, as well as to various forms of businesses.
Tax credit programs are offered in a wide range of topic areas, including Domestic Violence, Pregnancy Resource Centers, and Diaper Banks, enabling clients to find a fit that aligns with both their charitable interests and their tax savings goals.
Win-win philanthropy: it’s worth checking to see if your favorite nonprofit offers any state tax credits for donations toward their charitable needs and doing the due diligence to ensure suitability for your needs.
Your Moneta wealth advisor can help.
*Charitable credits vary in structure by state, so ask your wealth advisor for insights into your home state’s programs.
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