How it Works
Scholarships for Kids uses a portion of your tax liability to provide tuition assistance to students who demonstrate a financial need. You’re not just giving a scholarship, you’re getting a tax credit. By redirecting a portion of your tax liability to Scholarships for Kids, you reduce the total amount of your tax bill by 100%. You have an opportunity to give a child access to an education they could not otherwise receive at no cost to you. So the question isn’t “why,” but rather, “why not?”
The Alabama Accountability Act currently establishes an annual $40 million statewide limit on the tax credits. The credits will be awarded on a first-come, first-served basis, and may be carried forward for three years.
Alabama Business Owners
Federal Tax Regulations now offer potential dual benefits for owners of specified pass-through business entities (PTEs) who donate to scholarship granting organizations (SGOs).
Benefits of Charitable Donations
Combined Tax Benefits
Your business could reduce its taxable income with a deductible expense on the federal side and reduce your personal Alabama state income tax liability dollar-for-dollar in the amount of your business’s contribution. The net effect is a potentially greater combined federal and state tax benefit than the total dollar amount of the donation.
Qualifications for Business Expense Deductions
A charitable donation qualifies as a business expense if: