Who is eligible for the tax credit?Any individual taxpayer who makes a voluntary contribution to the STO is eligible for the tax credit. Additionally, corporations that file an 1120 or 1120A Iowa tax return can also can take advantage of this tax credit program.
How does a tax credit work and how is it different than a tax deduction?A tax deduction reduces the total amount of income on which a person’s tax is computed. With a tax credit, the amount of the tax credit is taken directly off the amount a person pays in state taxes thus providing the donor with a much greater financial return. As an example, a person who originally owed $2,000 in state income taxes, donating $1,000 to a School Tuition Organization, would receive 65% of the $1,000 – or $650 – taken off of their state income tax bill. The person would only pay $1,350 in state income taxes as opposed to the original $2,000.
What about my Federal income tax?The STO gift is eligible as a charitable contribution on federal tax forms, unless utilizing the IRA Rollover program. See below.
What if I don’t itemize my taxes?Even if you don’t itemize your taxes you can take advantage of the 65% Iowa Income Tax Credit. You would not be able to take a federal deduction however.
Is there a limit on the size of individual gifts accepted by the ‘Our Faith, Our Children, Our Future School Tuition Organization?’The STO can accept any size gift until the total tax credit limit has been reached.
Can the Our Faith, Our Children, Our Future School Tuition Organization accept IRA Rollover Gifts?Yes. Any donor wishing to take advantage of his/her required minimum distribution needs to contact their IRA custodian to ensure the correct and legal transfer directly from their IRA to the STO. The maximum allowed required minimum distribution IRA distribution is $100,000 annually. Below is the general procedure for making a qualified charitable contribution of a required minimum distribution to the Our Faith STO:
- The donor should already be age 70 1/2 on the date of distribution.
- Submit a distribution form to the IRA custodian, requesting that the check be made payable directly to Our Faith STO.
- Ensure that no tax withholding is being done from the qualified charitable deduction(QCD) to Our Faith STO (as the money must actually go to Our Faith STO to qualify, and as a non-taxable distribution no withholding should be necessary).
- Send the check directly to Our Faith STO(preferred), or to the IRA owner to be forwarded to Our Faith STO.
Please consult your tax professional prior to making a donation. If there are scenarios that you feel fall outside of these criteria, please contact Jeff Schneider at 563-556-2580 ext. 219.
Can the Our Faith, Our Children, Our Future School Tuition Organization accept non-cash items?Yes, non-cash items such as shares of stock, mutual funds and grain are accepted.
When I donate, may I designate a student to receive the tuition grant?No, a donor may not specify a student or family for the tuition grant, but may designate a portion of their gift to any accredited non-public school supported by the STO.
May gifts to the Our Faith, Our Children, Our Future School Tuition Organization be restricted to an individual school?Yes. It is possible for a donor to restrict 50% of their gift to an individual school or system represented by the STO. It is important to note, however, that once the identified needs of the families attending that school have been met, as determined by an outside agency, any unused restricted donations will be distributed to other needy families at other STO schools where the local need has not been met. Unlike an endowment fund, donations cannot be held to support future needs. Therefore, the STO must raise funds annually and present scholarships annually to meet the ongoing needs of the eligible families.
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