November 2017 Tax Planning Update:
Get up to a $9,000 tax credit on your 2017 taxes — here’s how to apply, if eligible
Although we are heading into year-end, it’s not too late to look at ways you can reduce your tax burden in 2017.
In fact, there’s a new and beneficial tax credit available to Georgians that we urge you to consider. This credit is for individual taxes only, and it’s mainly for Georgia taxpayers with taxable income greater than $200,000 who are subject to the alternative minimum tax (AMT). This is not a credit for business taxes because pass-through entities, such as partnerships and S Corporations, do not qualify for this credit.
Current tax reform efforts should not put this credit in jeopardy, but current tax legislation could put the Federal tax benefits in jeopardy.
What Is the Credit?
The Georgia Qualified Rural Hospital Organizational Credit (QRHOC) was established to encourage the reallocation of state tax dollars to support rural hospitals that the state deems are eligible to receive donations. This credit provides a dollar-for-dollar reduction in Georgia income tax and a federal charitable donation deduction. The Georgia credit is limited to 90 percent of the amount donated, and there is an application process since the credit is capped at $60 million per year through 2019.
Time is of the essence to apply. Here are three points you should know about the credit:
• For single and married-filing-separate taxpayers, the credit cannot exceed 90 percent of the amount donated or $5,000, whichever is less.
• Taxpayers filing as married (jointly) are eligible for a credit that cannot exceed 90 percent of the actual amount donated or $10,000, whichever is less.
• In any case, the credit cannot exceed the taxpayer’s Georgia income tax liability, but any amount disallowed carries over to the next five years’ tax liability.
Is This Credit for You?
If your 1040 taxable income is greater than $200,000 — and, therefore, subject to the AMT — CB Smith & Associates recommends donating through the Georgia Tax Center (GTC) to get the QRHOC.
Most families with taxable incomes over $200,000 are likely to face the federal AMT because of the way this alternative tax is calculated. Taxpayers who are assessed the AMT end up losing some or all the benefits of traditional federal tax deductions, such as state income taxes, real property taxes and other miscellaneous deductions. However, charitable donations are deductible when computing the AMT and regular income tax. Therefore, Georgia residents who face the AMT stand to benefit significantly by converting a nondeductible state income tax deduction into a deductible charitable donation on their federal income tax returns.
This credit mainly benefits taxpayers subject to the AMT. Since the Georgia credit is only 90 percent of the contribution amount, there is a small financial cost for tax filers who are not subject to the AMT.
If you’re unsure whether you may be subject to the AMT, CB Smith & Associates can help. Contact Chris Peterson, tax manager, at chris.peterson@cbsmithcpa.com or 678.205.5278 x122 to discuss your situation.
How to Apply for the QRHOC
The Qualified Rural Hospital Organizational Credit is administered and managed electronically through the Georgia Tax Center at
https://gtc.dor.ga.gov. It is easy to register for an account online if you do not have one already.
Before starting your application, we suggest choosing the hospital you would like the credit to go to. Click the links below to download PDFs and peruse the list of eligible hospitals:
To apply for the QRHOC, follow these steps:
• Log in to your account
• Click “Your Account ID”
• Click the “Credits” tab and select “Request Credit Pre-approval”
• Choose credit #136 — Qualified Rural Hospital Organizational Credit
• Select the fund year
• Use the dropdown list to select the name of the rural hospital that you want to support and indicate the contribution amount (this appears toward the end of the application)
• Complete and submit the application online
Taxpayers will be notified within 30 days of the status of their application. After the application status is received, the taxpayer has 60 days from the date approved, within the calendar year, to submit the contribution. Within 30 days after the contribution is made, the hospital will provide a tax credit certificate to the taxpayer. This tax credit certificate must be uploaded to the state of Georgia through the GTC website once the certificate is received.
To learn more about how the QRHOC may benefit you, or to discuss any questions you may have, please contact Chris Peterson, CB Smith & Associates’ tax manager, at chris.peterson@cbsmithcpa.com or 678.205.5278 x122.
