Homeless Shelter / Food Bank

The Tax Attic with Jerry Coon

September 9, 2010 // 0 Comments

NKSC donations now qualify for Michigan tax credit The Michigan Treasury Department works year round. It may be a slimmed-down version compared to the tax season, but those working seem to be working hard. Those of us in the professional tax business see evidence of their efforts from time to time. Usually a taxpayer will receive a letter or some correspondence from Treasury, requesting verification of a transaction or requesting that the taxpayer send Treasury some money for an error on a tax return. That is the type of effort that we could really live without. However, once in a while, we get some really good news from Treasury. Recently, the North Kent Service Center (NKSC) received a letter determining that it qualifies as a certified Homeless Shelter/Food Bank. This is extremely good news for NKSC. As a certified Homeless Shelter/Food Bank organization, monetary contributions made direct to NKSC qualify for a credit on the Michigan tax return. This particular credit is one of the best credits known to mankind. On a joint Michigan tax return, 50% of a contribution up to $400 qualifies as a credit against income tax liability. Give $400 to NKSC and receive $200 of tax credit. On a single return, the limit is 50% of up to $200, which generates $100 of tax credit. This is a non-refundable credit, so the taxpayer has to have some liability. But for those with a tax liability, this is a wonderful way to reduce that tax liability and help out a local organization. A further advantage of making contributions is that they are also allowable on the federal Schedule A as a charitable contribution. For taxpayers who do itemize their deductions, this really reduces the final net out-of-pocket cost. For example, taxpayers in the 25% federal income tax bracket make a $400 contribution to NKSC. They will receive a $200 tax credit on their Michigan tax return. They will also receive a $400 deduction on their Schedule A. This deduction, since they are in the 25% tax bracket, saves them $100 in taxes ($400 times 25%). They will save $200 of Michigan tax and $100 of federal tax for a total tax savings of $300. Their net out-of-pocket cost for writing a $400 […]