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 $30 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.

Individual Donors

  • Redirect up to 100% of your Alabama state tax liability.

  • Maximum tax credit available on an individual tax return is $100,000 annually.

PASS-THROUGH ENTITIES

  • Redirect up to 100% of your Alabama state tax liability.

  • No maximum limit for the tax credit.

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

  • Payments made by C corporations and PTEs to charitable organizations may qualify as ordinary and necessary business expense deductions.
  • These donations may reduce taxable income at the entity level.
  • Individual owners of PTEs can receive state and local tax (SALT) credits, offering relief on the federal cap of $10,000 on the SALT deduction.

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:

  • It is a reasonable, ordinary, and necessary expenditure incurred in carrying on the trade or business.
  • The entity reasonably believes the program will generate significant name recognition and goodwill in the communities where it operates, thereby increasing its revenue.

Annual Reports

2020 | 2021 | 2022