Tis the Season. We’ve all heard, thought, and used this phrase. It applies to almost everything we do. For CPA firms like Hauk Kruse & Associates (HKA,) it means, time to wrap-up planning.
The Affordable Care Act (ACA) provisions began limiting the ability to deduct all itemized deductions, including charitable contributions, this year. A terrific way to make your giving goals and lessen the impact of the ACA is to give money to charities that also grant state tax credits.
In Missouri, Youth Opportunities Program (YOP) and Neighborhood Assistance Program (NAP) contributions qualify for a 50% MO state tax credit. This is one of the few areas of state and federal law where instead of double taxation you receive double tax deduction!
Here is an example, we’ll use a contribution of $1,000 to a local charity that has been authorized to grant these credits, say University Children’s Center (UCC). The $1,000 qualifies as a Federal tax deduction, Missouri tax deduction, and a Missouri tax credit. You are getting a deduction federally and in Missouri twice! Let’s assume you are in the highest tax brackets (39.6% Federal and 6% Missouri.) The ending math looks like this: For your $1,000 contribution to UCC, you received a reduction of your federal taxes of $396, your MO taxes of $60, and an additional tax credit from the UCC YOP credit in Missouri of $500. That’s right, in this example it cost you $44 to make a $1,000 donation to UCC! When you consider the impact on your cash flow, this qualifies as one of the greatest investments made. The UCC is doing wonderful things. We’ll highlight them in an upcoming blog that will convince you they are a great place to make a difference. Besides, Tis the Season to Care!