If you are looking for tax-efficient giving strategy, you might consider contributing to charitable organizations associated with state tax credits. Senior tax team associate Jake Shockley offers examples and insight below.
Did you know that the state of Missouri has a tax credit program where you can get up to 70% of a tax credit on your qualifying charitable contributions. There are four credits Missouri offers that can yield a tax credit on your return just for donating to a qualifying organization. The credits are the Domestic Violence Shelter Tax Credit, Diaper Bank Tax Credit, Food Pantry Tax Credit, and the Maternity Home Tax Credit.
How do these credits work? Once you make your donation to a qualifying organization, you should receive an application for a Missouri tax credit. Fill the information out and send it back to the organization you donated to. The organization will send that application to Missouri and in 6-8 weeks a letter should be sent with information on the credit. Once you receive this letter all you need to do is give it to your tax preparer. This credit will go on form MO-TC and will be shown on line 40 of the MO 1040.
There are two slight drawbacks with taking this credit. The first is you can’t take the full charitable deduction on your federal return if you itemize. For example, if you donated $1,000 and received a $500 tax credit, you can only take a $500 charitable deduction on your federal return. The second drawback is you can only take a credit up to your Missouri tax liability. The excess credit will be carried forward to the next year. Below is a breakdown of each credit and how much of a credit you could receive.
Diaper Bank Tax Credit revolves around organizations established for the purpose of collecting or purchasing disposable diapers or other hygiene products for infants, children, or incontinent adults. These organizations regularly distributes such diapers or hygiene products to two or more schools, health care facilities government agencies, or other nonprofit entities. A $100 or more contribution will yield a 50% credit. An organization where a contribution will grant a Diaper Bank Tax Credit is The St. Louis Area Diaper Bank.
Domestic Violence Shelter Tax Credits are facilities established to provide temporary residential services or facilities to families or household members who are victims of domestic violence. A $100 or more contribution made after July 1, 2022 will yield a 70% tax credit. Contributions made before July 1, 2022 will yield a 50% credit. An organization where a contribution will grant a Domestic Violence Shelter Tax Credit is Lydia’s House.
Food Pantry Tax Credit is received for a cash donation or donation of food supplies to a qualified local food pantry, homeless shelter, or soup kitchen. This credit yields a 50% credit but has a limited amount available. Taxpayers can claim up to $2,500 of Food Pantry Credits in a given year and has $1,750,000 available to all taxpayers. This credit does not go on the MO-TC but is filed with the MO-FPT. Missouri will hold all of the claims until after April 15th when all of the returns have been processed. If the amount of claims exceed the $1,750,000 available, the department will apportion the credits in an equal ratio among all valid returns filed.
Maternity Home Tax Credit is for organizations that provide services at no cost to clients and established for the purpose of providing housing and assistance to pregnant women who are carrying their pregnancies to term. A $100 or more contribution made after July 1, 2022 will yield a 70% tax credit. Contributions made before July 1, 2022 will yield a 50% credit. An organization where a contribution will grant a Maternity Home Tax Credit is The Haven of Grace.