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Virginia’s Education Improvement Scholarships Tax Credits Program“EISTC”
What is a “Tax Credit”?
A tax credit allows taxpayers to subtract the amount of the credit – dollar-for-dollar – from the total they owe the state in taxes, not from taxable income. Therefore, Tax Credits directly reduce tax bills.
What is the “EISTC” Program?
The Education Improvement Scholarships Tax Credits program provides Virginia tax credits for persons or businesses making donations to approved scholarship foundations that, in turn, provide scholarships to eligible students to attend accredited private schools.
How is This Charitable Donation Different from Others?
Donors receive Virginia tax credits for 65% of the full value of the donation.
Donors ALSO receive their usual state and federal charitable tax deductions.
Both individuals and businesses are eligible to receive these tax credits.
Tax credits (up to $25 million statewide) awarded on a first-come, first-served basis, subject to a Department of Education pre-authorization process.
Donations must be made to a scholarship foundation, not directly to a school.
EISTC Program
Scholarship Foundation
(approved by Virginia Department of Education)
Individual or Business Donation
Private School Tuition Scholarships for Eligible Students
Donor receives 65% of donation back in Virginia tax credits, plus federal and state deductions for charitable gifts.
Which means…
McMahon Parater Foundation for
Education(Diocese of Richmond)
A Donation from You or Your
Company
Scholarships for Eligible Blessed Sacrament Huguenot Students
You receive 65% of your donation back in Virginia tax credits, plus your usual federal and state deductions for charitable donations.
What Does This Mean for Donors?
Education Improvement Scholarships Tax Credits
ProgramDonation Amount (Federal non-AMT taxpayer)*
$1,000
$5,000
$10,000
Tax Savings*
Virginia Tax Credit (65%) 650 3,250 6,500
Federal Tax Effects (at 33% rate)**
Savings from federal charitable deduction
330 1,650 3,300
Less - Cost of reduced deduction for VA taxes
-233 -1,167 -2,335
VA Tax Savings (at 5.75% rate) 58 288 575
Total Savings 805 4,021 8,040
Net Cost of Donation $195 $979 $1,960* Above demonstration is for individual taxpayers not subject to the Federal Alternative Minimum tax.** Pease Limitation, reinstated Jan. 1, 2013, may impact actual federal tax savings.
Individual circumstances may vary.
Individual Taxpayer
Education Improvement Scholarships Tax Credits
ProgramDonation Amount (Federal AMT taxpayer)*
$1,000
$5,000
$10,000
Tax Savings*
Virginia Tax Credit (65%) 650 3,250 6,500
Federal Tax Savings (at 28% rate) 280 1,400 2,800
VA Tax Savings (at 5.75% rate) 58 288 575
Total Savings 988 4,938 9,875
Net Cost of Donation $12 $62 $125
* Above demonstration is for individual taxpayers who ARE subject to the Federal Alternative Minimum tax.
Individual circumstances may vary.
Individual Taxpayer
Education Improvement Scholarships Tax Credits
ProgramDonation Amount (Corporate taxpayer)*
$1,000
$5,000
$10,000
Tax Savings*
Virginia Tax Credit (65%) 650 3,250 6,500
Federal Tax Effects (at marginal 34% rate)**
Savings from federal charitable deduction
340 1,700 3,400
Less - Cost of reduced deduction for VA taxes
-241 -1,207 -2,414
VA Tax Savings (at marginal 6% rate) 60 300 600
Total Savings 809 4,043 8,086
Net Cost of Donation $191 $957 $1,914* Above demonstration is for business taxpayers.** Pease Limitation, reinstated Jan. 1, 2013, may impact actual federal tax savings.
Individual circumstances may vary.
Business Taxpayer
What Happens with Appreciated Stock?
Using Appreciated Stockto Make the Donation
Non-AMT Taxpayer AMT Taxpayer
Market Value of Donated StockCost Basis of Stock Capital Gain
$10,000 3,000
7,000
$10,000 3,000
7,000
Savings from Not Having to Pay Taxes on the Capital Gain
Federal Tax Savings (23.8% Rate) * 1,666 1,666
Virginia Tax Savings (at 5.75% Rate) 403 403
Total Savings from Not Having to Pay Tax on Capital Gains 2,069 2,069
Tax Savings from Donation (Excluding Savings on Capital Gains) **
Virginia Tax Credit (65%) 6,500 6,500
Federal Tax Savings (33% Rate non-AMT/28% Rate AMT) 3,300 2,800
Less – Cost of reduced deduction for Virginia taxes (2,335) n/a
Virginia Tax Savings (at 5.75% Rate) 575 575
Total Savings from Donation (Excluding Savings on Capital Gains) 8,040 9,875
Total Savings from Donation of Appreciated Stock 10,109 11,944
Excess of Tax Savings Over Value of Stock Donated $109 $1,944
* Long Term Capital Gains Tax of 20% plus Affordable Care Act Surcharge of 3.8%.** Pease Limitation, reinstated Jan. 1, 2013, may impact actual federal tax savings.Individual circumstances
may vary.
Donor Provisions:Turbo-Charging Your Donations!
Individuals must donate at least $500 and are limited to $125,000 per year.
$500 minimum but no maximum on business donations, including sole proprietorships.
May donate cash or marketable securities. Amount of credits may not exceed tax
liability in a given year. Unused credits may be carried over until total is taken, up to five additional years.
Donors may not direct scholarships to a particular student, but may request that their gift support scholarships at specific schools.
Scholarship Recipients
Eligible Students: Annual Household income less than 300% of
poverty $71,550 for family of four
Except Students With Disabilities: 400% of poverty $95,400 for a family of four
Must be a resident of Virginia and Enrolled in a Virginia public school for at least half of
the prior or current year, or Eligible to enter kindergarten or first grade, or Not a resident of Virginia the preceding school year, or A prior recipient of an EISTC scholarship.
How Do I Get Started?
The Way It Works
A donor or the scholarship foundation receiving the donation must request preauthorization for a specific amount of tax credits from Virginia Department of Education (DOE).
If the donation is not made in whole or part within 180 days of issuance, the tax credit preauthorization is void.
Scholarship foundation notifies the DOE after receiving donation. DOE issues tax credit certificate. Donor attaches certificate to tax return.
Step by Step…
Donor
MPFE
DOE
Donor
MPFE
DOE
Obtains blank Letter of Intent and Preauthorization Form and sends the completed documents to MPFE.Files the Preauthorization Form with the Virginia Department of Education (DOE).Authorizes and mails a numbered Preauthorization Notice to the Donor.
Signs the numbered Preauthorization Notice and sends to MPFE with the donation within 180 days.Notifies DOE that the donation has been received, and sends Donor acknowledgement letter.Sends the Tax Credit certificate to the Donor.
Where Can I Get More Information?
Blessed Sacrament Huguenot Catholic School
Grace Creasey Director of Development(804) 598-4211, ext. 515 [email protected]
Paula LedbetterHead of School(804) 598-4211 [email protected]
Joyce SchreiberDirector of School DevelopmentMcMahon Parater Foundation(804) [email protected]
