Nationwide, 4.1 million Americans pay more than $10,000 each in property taxes alone, according to ATTOM Data Solutions. The itemized deductions of many taxpayers stand to be severely limited with the new $10,000 cap on state and local taxes enacted as part of tax reform in December of 2017, especially if multiple personal real properties are owned. Georgia taxpayers may have an opportunity to serve their fellow Georgians with a win-win credit which was recently just enhanced.
The Rural Hospital Tax Credit Program became effective in Georgia beginning January 1, 2017, to help address the rural health crisis in Georgia. Now, Georgians can pay their 2018 Georgia income taxes with a contribution to a qualified rural hospital, improving access to health care for their fellow Georgians and after July 1, 2018 receive an even bigger benefit thanks to a recently passed legislative expansion to the program.
The potential benefit can be summarized as follows: a Georgia taxpayer contributes to a Rural Hospital and may receive a Federal Charitable donation which may be partially or fully deductible – so long as total contributions don’t exceed 60% of total adjusted gross income, for individuals.
The taxpayer will be able to then take a Georgia tax credit for 100% of the deduction for contributions after July 1, 2018. Previously, the credit amount was limited to 90% of the donation amount and was available at a maximum of $5,000 for single taxpayers and $10,000 for married filing joint taxpayers, so long as the total cap on the contributions has not been met.
On the last day of the Georgia legislative session on March 29th, Georgia lawmakers approved the credit increase to 100% of the donated amount, and are removing the $5,000 and $10,000 caps as noted above for donations after June 30th of each year for non-corporate contributions, until the statewide cap is reached. Owners of pass-through entities qualify as eligible contributors. The bill further expands the program for two additional years, to 2021.
The Georgia Rural Hospital Organization Expense Tax Credit Program has qualified 58 hospitals. This credit is available on a first-come-first-serve basis and is capped at $60,000,000 for 2018. Each hospital may receive up to $4 million in donations annually until an annual state cap has been reached of $60 million. At that point, the program will be suspended for the remainder of the year. As of March 1st, only $5.3 million of the capped had been reached.
The credit potentially converts what may otherwise be a non-deductible state income tax deduction into a deductible charitable contribution, for taxpayers who will itemize under the new tax law. Other states have proposed implementing similar programs to combat the state and local tax deduction limitation. Accordingly, the IRS responded recently by issuing notice 2018-54 announcing its intention to propose regulations addressing the federal income tax treatment for certain payments made by taxpayers for which those taxpayers receive a credit against their state and local income taxes. Until the Service does issue this guidance, taxpayers should be advised that the Service has not yet provided final definitive guidance on the Federal deductibility of the contribution.
Your BT Professional can assist you with the application process for the Rural Hospital Tax Credit Program if you are interested. Please reach out to Jeff Call or Bridget Dunk by calling 770.396.2200 for more information.