Because of COVID, online sales are skyrocketing compared to last year, and I hope everyone will focus on shopping locally online. Local merchants need our help.
While everyone is in the mood for giving, I think we could all agree that one of the greatest gifts a person can receive is the gift of the best education they can get. What if you could help give better education to a child from a low-income family, and it would not cost you a penny? Sound too good to be true? Well, read on…
The Alabama Accountability Act (AAA)
AAA allows you to redirect a portion of your state income taxes to a Scholarship Granting Organization (SGO) who, in turn, will provide funding for a child who’s in a failing school to attend a private school or transfer to a non-failing public school. These scholarships go to children from low-income families.
Your tax credit is limited to 50% of your tax liability…but do not worry, any excess can be carried over to next year.
For example, assume that you expect to owe the State of Alabama $2,000 of income taxes. You decide to contribute $1,000 to a qualified Scholarship Granting Organization. You write your check to the SGO; then, on your state tax return, you take a $1,000 tax credit…, so you send the Alabama Department of Revenue $1,000 instead of $2,000. In other words, it did not cost you anything to redirect these tax dollars to low-income students who are trying to get a better education.
If you need help
For more information, visit the websites of either of the two largest scholarship-granting organizations (SGO’s) in the state:
- Scholarship for Kids. This SGO has a very helpful step-by-step website at scholarshipforkids.org. I particularly like that they require the parents to contribute at least a nominal amount towards the scholarship…making sure they have some ‘skin in the game.’
- Alabama Opportunity Scholarship Fund. They also have a step-by-step guide at alabamascholarshipfund.org.
Let’s all remember that our state’s future economy, in many ways, hinges on the quality of the education our state’s children receive. Under the Alabama Accountability Act, each of us has the opportunity to redirect a portion of our state income taxes, without any costs to us, to a better education for underprivileged children. Be sure to share this article with your fellow taxpayers, and together we can raise our state’s educational standards!
Consult your tax advisor before acting on these comments.
Follow The Welch Group every Tuesday morning on WBRC Fox 6 for the Money Tuesday segment.
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Tis the Season for Giving…A Better Education!
- State of AL offers $30 Million in scholarship funds through income tax credits
- You redirect state income taxes to an SGO (scholarship-granting organization)
- As a tax credit, it cost you nothing
- Visit ScholarshipForKids.org or AlabamaScholarshipFund.org for more information
Stewart H. Welch, III, CFP, AEP, is the founder of THE WELCH GROUP, LLC, which specializes in providing fee-only investment management and financial advice to families throughout the United States. He is the author or co-author of six books, including J.K. Lasser’s New Rules for Estate, Retirement and Tax Planning- 6th Edition (John Wiley & Sons, Inc.); THINK Like a Self-Made Millionaire; and 100 Tips for Creating a Champagne Retirement on a Shoestring Budget.
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