Idaho education tax credit rewards donors

Are you seeking a way to decrease the amount of taxes you owe? The Idaho Code provides a tax credit for financial contributions to qualified educational entities now through the year 2020 (Chapter 30, Title 63). The credit is limited to the smallest of the following:

  • One half of the amount donated,
  • 50% of your Idaho tax,
  • $500 for an individual or $1,000 to a couple filing jointly, or
  • Your Idaho tax minus the amount of credit for income tax paid to other states.

This tax credit is available regardless of whether or not you itemize deductions; however, those who itemize their taxes may receive more benefit. Idaho married couples filing jointly may take up to 50% of a $2,000 gift (a tax credit of $1,000). An Idaho individual may take up to 50% of a $1,000 gift (a tax credit of $500) and an Idaho C corporation may take up to 50% of a $10,000 gift (a tax credit of $5,000).

How can this credit boost my impact?

Here is an example of an Idaho married couple who itemize their taxes. Together they have a taxable income of about $75,000 (25% tax bracket). They wish to donate $2,000 to the Wired2Learn Foundation this year. Their gift qualifies for the following: $500 Federal Tax Savings + $148 State Tax Savings + $1,000 Idaho Education Tax Credit. With these deductions and the Idaho education tax credit, a $2,000 gift to the Wired2Learn Foundation has an actual cost to them of only $352.

$ 2,000 Gift – Benefit to Wired2Learn Foundation
-$ 500 Federal Tax Savings
-$ 148 Idaho Tax Savings
-$ 1,000 Idaho Education Tax Credit
$ 352 Actual Cost

A gift of $10,000, given in increments of $2,000 per year over five years, would allow taxpayers in our example to see an actual cost to them of only $1,720 during this five-year period.

This example is based on deductions available for a married couple in the 25 percent tax bracket who itemize their taxes. Your tax benefit is dependent on variables such as your income level and filing status. All donors should consult with their tax professional to develop the best plan for their personal situation.

This is an incredible opportunity for people who wish to support educational organizations, whether it’s our foundation or other eligible entities such as libraries, or museums. This credit only applies to financial gifts, not in-kind gifts.

W2L Foundations qualifies as:

  • A nonprofit, public or private Idaho School (elementary, secondary or higher education) or its foundation

The Idaho tax credit is a credit, not a deduction. A tax credit lowers your tax dollar for dollar; whereas a deduction, lowers your taxable income and the value of that deduction depends on your tax bracket. The Idaho tax credit was set up to incentivize clients to give to our local schools, libraries, and other qualifying entities. It was meant to help donors invest money into our community and saves state income tax at the same time.

The Idaho Education Tax Credit applies only to those who owe Idaho tax. Unfortunately Washington residents who don’t owe taxes in Idaho don’t receive this credit for donations to these nonprofits.

Adapted from the Teton Valley News by Teton Valley Education Foundation, Jul 21, 2017

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