Due to the Tax Cuts and Jobs Act, fewer individuals will be taking advantage of itemized deductions and will instead be claiming the standard deduction. However, if you are charitably inclined and are on the cusp of being able to take advantage of itemizing your deductions, there are few planning strategies that should be considered:
- Qualified Charitable Distributions (QCDs) – for more information click here
- Donor-Advised Funds (DAFs) – for more information click here
- “Bunching” Charitable Contributions – for more information click here
- Virginia Neighborhood Assistance Program (NAP)
Qualifying contributions made to the NAP can be very favorable for individuals, businesses and trusts and benefit specific charitable organizations serving low-income communities located in Virginia. This program allows individual taxpayers to take a charitable contribution up to $125,000 per year on the Federal tax return, and then receive a maximum tax credit of 65% of the value of the donation as a credit on the Virginia income tax return. There currently is no maximum donation limit for businesses or trusts. Businesses who are considering making contributions to the NAP should consider the new IRS Safe Harbors for businesses see article here.
How to Qualify for the Neighborhood Assistance Program Tax Credit
Donate cash, marketable securities, or other items/services directly to an approved NAP organization. The purpose of the NAP is to encourage donations to approved non-profit organizations to benefit low-income persons or an eligible student with a disability.
What Taxpayers Receive
A Virginia tax credit of up to 65% of the donation value.
A NAP tax credit is non-refundable and non-transferable. Excess donor credit, if applicable, may be carried forward for up to 5 years.
Claim the credit against the following taxes administered by Virginia :
- individual income tax
- fiduciary income tax
- corporation income tax
- bank franchise tax
- insurance premiums license tax
The credit may also be claimed against certain utilities taxes administered by the State Corporation Commission.
Who is Eligible for the Credit
- Individuals donating cash or marketable securities. The minimum donation must be at least $500 per taxable year. An individual is limited to a maximum donation value of $125,000 per taxable year.
- Trusts donating cash, stock, merchandise, real estate, and the rent/lease of a non-profit’s facility. The minimum donation must be at least $616 per taxable year.
- Businesses donating cash, stock, merchandise, real estate, the rent/lease of a non-profit’s facility, professional services, or contracting services. The minimum donation must be at least $616 per taxable year.
- Limited health care, pharmaceutical, mediation, or physician specialists providing services for an approved NAP non-profit organization. The minimum donation must be at least $616 per taxable year.
How to Apply for the Credit
To determine your eligibility, contact the NAP non-profit organization to which you would like to make your donation and fill out the appropriate donor form. Return the completed donor form to the NAP non-profit organization. The NAP non-profit organization will forward the completed donor form to the Department of Social Services or the Department of Education to have your NAP tax credit certificate issued. The NAP tax credit certificate will be mailed directly to the donor.
If you or your business is interested in making a contribution to a NAP organization, please view the list of qualified organizations here as well as NAP frequently asked questions and other pertinent NAP information. You may also view guidance on all Virginia Housing and Community Development Tax Credits available by clicking here.