INAPEF has been pursuing legislation that allows tax credits for public education foundations. Our legislative committee is hard at work meeting with state lawmakers to have the bill authored and ensure it receives a hearing in 2023. A letter will be sent to all Indiana lawmakers in September detailing why a tax credit is needed and how it will impact our schools. We will have updates and a plan for membership to help support our efforts at the Annual Conference.
What is a Tax Credit?
According to the IRS website, "tax credits provide a dollar-for-dollar reduction of your income tax liability." This means that a $1,000 tax credit saves you $1,000 in taxes.
On the other hand, tax deductions lower your taxable income and they are equal to the percentage of your marginal tax bracket. For instance, if you are in the 25% tax bracket, a $1,000 deduction saves you $250 in tax.
Tax Credits vs Tax Deductions
Tax credits is differ from tax deductions. A tax credit is always worth more than an dollar-equivalent tax deduction, because deductions are calculated using percentages. Referring to the numbers above, you can see that a $1,000 credit offers $750 more in savings than a $1,000 deduction."
How Tax Credits Benefit your Foundation
Being able to offer tax credits could increase the donation amounts you receive and bring in new donors who are interested in lowering their income tax liability. There are donors who specifically seek tax credit opportunities because of the additional savings that they provide.