Effective for 2008, Georgia has enacted a new tax credit program which permits individuals and businesses to receive a credit for contributions to qualified student scholarship organizations (SSOs).  This is a very attractive credit because, in some cases, federal and Georgia tax savings may exceed the amount of the contribution. Scholarship programs administered by the SSOs will provide many families with the opportunity to send their children to Georgia private schools for grades K through 12.

An SSO is an approved charitable organization under Section 501(c)(3) which must spend at least 90% of its donations on scholarships. There is a $50 million cap on the total amount of Georgia tax credits that will be awarded each year.

The availability of the income tax credits is on a first-come, first-served basis. A married couple filing a joint return receives a dollar-for-dollar credit against Georgia income tax for donations up to $2,500 ($1,000 in the case of single or head of household filers).

Corporations receive a dollar-for-dollar credit for donations up to 75% of the Georgia income tax liability. For federal tax purposes, you may deduct the donation as a charitable contribution, since the SSO is qualified as a charitable organization. For Georgia, you must add the contribution back to taxable income, but you will claim the tax credit.

For example, assume a married couple filing a joint return is in the 35% federal and 6% Georgia tax brackets. The couple will save federal tax of $875 on a donation of $2,500. Their net Georgia tax savings are $2,350, because they are entitled to a credit of $2,500 but have additional tax of $150 on the contribution added back to federal taxable income. Their total tax savings are $3,225, which is $725 more than their actual contribution. To pre-qualify your donation for the tax credit, you must send a form to the Georgia Department of Revenue to receive confirmation that the annual cap has not been reached.

To obtain approval, please follow these steps:

1. Contact the SSO of your choice to express your intent to contribute. A list of qualified SSOs is maintained on the Georgia Department of Education website indicated below.

2. Complete Georgia Form IT-QEE-TP1 (click here for a copy) and send it to the Georgia Department of Revenue (DOR) to request preapproval and indicate your donation amount.

3. The DOR will respond within 30 days with preapproval, denial, or reduction of your request based on the availability of credit remaining against the $50 million ceiling.

4. Make your contribution to the SSO within 30 days after you receive the preapproval notice from the DOR and by end of same calendar year for which your contribution was preapproved.

The SSO will send you a confirmation letter after it receives your donation. The letter must be attached to your Georgia tax return for the year of donation. If you are an individual, you will not be able to e-file your Georgia return because of this required attachment. Additional information on the credit, a current list of qualified SSOs, on Georgia Department of Education website and you may click on the link to download Georgia Form IT-QEE-TP1.

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