As the year is rapidly winding down there are a number of tax-saving strategies that I take advantage of this time of year. One of these is the new Ohio Scholarship Fund contribution.
Beginning with tax year 2021 individual taxpayers and pass-through entities can claim an Ohio tax credit for financial contributions made to an eligible scholarship granting organization (SGO). The credit equals the lesser of $750 or the total amount contributed per individual to the SGOs during the year. A married couple can claim up to $1,500.
This dollar-for-dollar state tax credit will offset the 2023 Ohio income tax liability for qualified donations made by Dec. 31, 2023. The taxpayer will receive a 100% tax credit for contributions claimed on the 2023 tax return. In other words, the taxpayer’s state tax can be reduced dollar-for-dollar up to $750 for an individual filer and $1,500 for a married couple on these qualifying SGO contributions.
The tax credit is limited to the total Ohio state income tax due for the year that is reported on the second page of their individual income tax return on line 13 of form Ohio IT 1040. Taxpayers can contribute more than $750 per individual to the SGO, but the credit is capped at $750 per individual taxpayer and $1,500 for a couple filing married filing jointly.
The taxpayer can also receive a federal tax deduction for this charitable contribution as it is considered a qualifying charitable contribution. So, there could be both a state and a federal tax benefit for this charitable contribution depending upon the taxpayer’s specific situations.
Gifts must be made to a qualified SGO. A link to the list of the qualifying SGO’s is at charitable.ohioago.gov. This list is continuing to grow as more charitable education groups apply for acceptance and become certified by the State of Ohio as qualified SGOs. In 2021 there were seven accepted organizations, in 2022 33 additional organizations were added, and in 2023 there were an additional 55 new organizations added.
For instance the Diocese of Cleveland has a website. Within this website there is a dropdown that includes numerous local schools including St. Mary’s Mentor, All Saints of St. John Vianney and Notre Dame Elementary to name a few. This allows the donor to designate their contributions for a given school that they may have an interest in supporting.
This contribution will reduce your State of Ohio income taxes on a dollar-for-dollar basis since it is a tax credit. For those taxpayers who itemize it could also reduce your federal income tax obligation as it would be considered a charitable contribution. Make sure you retain the receipt for your records as this will need to be attached to your Ohio tax filing to secure the tax credit.
As part of your year-end planning, you have a few weeks until the end of the year to make this contribution. Since you will be paying the same amount of money one way or the other, why not direct your funds to a qualifying SGO, rather than paying the same amount of money to the State of Ohio in your income tax obligation. I personally would rather have my money go to this type of scholarship granting organization rather than to the general fund of the State of Ohio.
Paul Pahoresky is the owner of PRP & Associates. He can be reached at 440-974-1040 extension 214 or at paul@prpassoc.com. Consult your tax advisor for your specific situation for additional information and guidance on these topics.
