Since 2014, the College Access Tax Credit has allowed individuals, business entities, and insurance companies to receive tax credit for 50% of any monetary donations made to the California Educational Facilities Authority (CEFA), an organization that raises money to help low income students afford college in California. The credit can be used to offset taxes, including insurance gross premiums tax and reducing the tax below the tentative minimum. Additionally, any unused credit can be carried forward for up to six years and taxpayers will be able to claim the credit until January 1st, 2023. As well as receiving the credit, taxpayers can also deduct the charitable contribution on their federal return. The only major drawback is that only monetary contributions can be used as claims; stocks or asset contributions do not count.
Example: Susie Smith applies for the credit on the CEFA website and her proposed contribution is $10,000. CEFA grants a $5,000 credit reservation (50% × $10,000). Susie makes a $10,000 contribution to the fund on November 22, 2017. CEFA sends the credit certification to Susie on December 1.
Susie may claim a $5,000 credit on her 2017 California tax return. She may claim a $10,000 charitable contribution on her federal return. However, she will not be able to claim a charitable contribution on her California return.
The application deadline to claim the credit is November 30th, 2017, at 5 pm Pacific Time and the application can be found on CEFA’s website. If you have any questions about your individual tax situation feel free to contact us.