Advocacy for Indiana's K-12 Public Education
What is a Tax Credit?
A tax credit is different than a tax deduction. 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.
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."
Another explanation of the difference is offered on the Indiana Department of Revenue website.
How Would a Tax Credit Benefit Our 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.
2021 Work on Tax Credit Legislation
Senate Bill 342 passed the State Senate and is now waiting to be heard in the House Ways and Means Committee. Education foundation leaders, including board of directors members, should contact any legislators on the House Ways and Means Committee and encourage them to get Senate Bill 342 heard in committee. A letter template is below that you can use to add specifics about your education foundation's work.
As amended, the bill:
Provides a 25% tax credit for donations to public school/education foundations (up to $1,000 for individual filers and corporations or $2,000 for joint filers)
Caps the credits at $5 million for the tax year.