The Georgia Department of Revenue offers some interesting tax deductions and tax credits for state residents.
GA Sponsored 529 Plans:
Contributions to a Georgia sponsored 529 Plan allows for a tax deduction. State residents can deduct up to $2,000 per tax year per beneficiary from their state taxes, regardless of income. In addition, the beneficiary does not have to be a dependent of the contributor. Taxpayers have until the April tax filing due date (April 17 for 2012) to make contributions for the previous year to receive the state tax deduction. This provides taxpayers a rare opportunity to affect their tax liability for 2011.
If you received the $2,000 tax deduction for the contribution and your child decides not to attend college, you are eligible for a refund. A ratio is used to determine the taxable portion of the contribution that is withdrawn. The earnings portion for nonqualified withdrawals is subject to state income tax, federal income tax, and a 10% penalty. There are exceptions for death or disability of the beneficiary. The exceptions allow withdrawals without a penalty; however, taxes are still due on the earnings portion of the withdrawal. If the beneficiary of the 529 Plan receives a scholarship, you can withdraw contributions and earnings up to the scholarship amount, without a penalty. Taxes will be due on the earnings portion of the withdrawal.
You can also change the beneficiary on the account to another family member.
Georgia Driver Education Tax Credit
The state of Georgia allows taxpayers to take up to a $150 Driver Education tax credit. Credits are a dollar for dollar reduction in your tax liability. This credit can be taken for the amount paid for a dependent minor child who successfully completes a driver’s education course at a private driver training school licensed by the Department of Public Safety. The amount of the credit is $150, or the actual amount paid for the course, whichever is less.
A private driver training school is one that primarily engages in offering driving instruction. The Georgia Department of Public Safety website at www.dds.ga.gov offers a list of approved driver education schools. It is important to know that private driver training schools do not include schools owned or operated by local, state, or federal governments. Courses offered at private and public high schools are also disqualified in claiming the credit.
The tax credit is offered only once per dependent minor child, regardless of how many times he or she has taken the course. The credit is also limited to the amount of the taxpayer’s income tax liability, which means it is not a refundable credit. Furthermore, driver education expenses are disallowed in computing the credit if deducted or subtracted in computing Georgia taxable income. Finally, the credit cannot be carried forward to future tax years or carried back and applied to previous tax years, if any unused amounts remain.
Be sure to keep written proof of successful completion and amount paid for the course with your tax return information.
Georgia Student Scholarship Organization Tax Credit
Citizens and corporations are eligible to receive a Georgia tax credit for donations to Georgia Student Scholarship Organizations (SSOs). SSOs will provide student scholarships to parents, which will help cover the cost of a private school education for their children in the state of Georgia.
The state limits the SSO donations to $50 million per calendar year; therefore, you must apply for approval prior to making the contribution by completing form IT-QEE-TP1. The form is sent to Georgia Department of Revenue. The Georgia Department of Revenue will pre-approve the donation and send you form IT-QEE-SSO1. Your contribution must be made within 60 days of the pre-approval notice, and within the calendar year in which the contribution was pre-approved. The maximum tax credit allowed is $2,500 for married filing jointly, $1,250 for married filing separately and $1,000 for single filers and head of household.
Businesses are also eligible for the Student Scholarship Organization tax credit. The maximum credit allowed for businesses is the lesser of 75% of corporation’s income tax liability or actual amount donated. Again, be sure and maintain all documentation with your tax returns.
At Henssler Financial we believe you should Live Ready, which includes taking advantage of tax deductions on your state return as well. If you have questions regarding your Georgia state income tax, the tax experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or e-mail at experts@henssler.com.
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
