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Tax Alert: Ohio Scholarship Donation Credit

December 12, 2022

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Beginning in tax year 2021, individual taxpayers and pass-through entities can claim an Ohio tax credit for financial donations made to an eligible scholarship granting organization (SGO). The credit equals the lesser of $750 or the total amount donated per individual to SGOs during the tax year.

This dollar-for-dollar state tax credit will offset the taxpayer’s 2022 Ohio Income tax liability for qualified donations made by December 31, 2022. The taxpayer will receive a 100% tax credit for their contribution to be claimed on the 2022 Ohio Income tax return filed in 2023.

  • The tax credit is limited to the total Ohio state income tax due throughout the tax year and can be found on page two of their state income tax return (Ohio IT 1040) line 10. Taxpayers may contribute more than $750, but the credit is capped at $750 per taxpayer. Gifts may qualify as a charitable contribution for federal income tax purposes.
    • Gifts must be made to a qualified SGO (see list of qualified SGOs here).
    • If the total tax liability exceeds $750 (single) or $1500 (married), then taxpayers are eligible to contribute up to the maximum and receive the credit.
    • If the total tax liability is less than $750 (single) or $1500 (married), then the tax credit is limited to the amount on line 10 of the taxpayer’s Ohio IT 1040.
    • Married couples can receive up to two separate $750 deductions, totaling $1500, however they must make two separate $750 donations, one in each of their names. A single contribution of $1500 by a couple filing married-filing-jointly will only result in a credit of $750.

 

Organizations Eligible for Scholarship Certification

  • Be a religious or nonreligious nonprofit organization exempt from federal taxation under section 501(a) of the Internal Revenue Code as an organization described in section 501(c)(3) of the Internal Revenue Code.
  • Primarily award academic scholarships for students to attend primary and secondary schools (K-12).
  • Prioritize awarding scholarships to low-income primary and secondary school students.
  • Comply with all registration and reporting requirements with the Ohio Attorney General applicable under the Ohio Charitable Trust Act, Ohio Revised Code (ORC) ORC 109.23-109.32, and/or the Ohio Charitable Organizations Act, ORC Chapter 1716.

 

Frequently Asked Questions Pertaining to the Ohio Scholarship Donation Credit

Question: A couple, each W-2 earners, have withheld via payroll deductions over $1500 in State of Ohio income tax for the year 2022. Can they each contribute $750 to generate a total credit of $1500 to offset their combined Ohio tax liability they have withheld and will owe in 2023?

Answer: Yes, as long as the total tax liability (either additional tax to be paid or already withheld) is $1500 the couple will be able to fully utilize the $1500 tax credit.

Question: Can an individual make a $750 contribution to a non-SGO 501(c)(3) and still take a $750 tax credit?

Answer: No, to claim the credit the individual MUST make a contribution to a qualified SGO.

Question: Can an individual make a greater than $750 contribution to a SGO and claim a federal tax deduction?

Answer: We recommend consulting your tax advisor. Certain situations may allow an individual to claim the Ohio tax credit AND a federal tax benefit for the remainder of contribution, but subject to certain limitations.

Resources

Click here to view a list of 2021 and 2022 Ohio Certified Scholarship Granting Organizations (SGOs). Note: Some SGOs such as the Archdiocese of Cincinnati will allow for a directed contribution to a school of choice.

Click here for more detailed information about the Ohio Scholarship Certification Process.

Clark Schaefer Hackett’s State and Local Tax (SALT) team is here to answer any questions you may have pertaining to the Ohio Scholarship Donation Credit or those around other SALT incentives and/or issues. Contact us for assistance.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

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