There are various Missouri state agencies that provision 50% and 70% income tax credits to incentivize taxpayers to make donations to specific organizations. As of the 2022 tax year, Missouri now has a program that will provision a 100%-income tax credit for donations made to qualifying educational assistance organizations (EAOs). The MOScholars credit was established by the Missouri General Assembly in 2021 with the goal of providing educational options to qualifying Missouri students. Specifically, the law facilitates a dollar-for-dollar tax credit equal to the amount that was timely contributed to an approved, nonprofit EAO. These EAOs allocate your contributions to award scholarships to eligible Missouri students to attend K-12 education at qualifying private institutions in Missouri or Missouri homeschool families. This article will help taxpayers understand and follow the steps and procedures to obtain a 100% income tax credit in Missouri.
Step 1: Apply for a Tax Credit (Minimum of $500).
Visit the Missouri State Treasurer’s website to “reserve” a tax credit. As there is a limited amount of funding each year, a taxpayer must reserve the amount in advance of the donation and subsequent approval of credit. You will need to choose which type of taxpayer/contributor you are, e.g., corporation, individual, etc., and you will then be queued up to complete your taxpayer information and select the EAO that will receive your donation from a drop-down menu. If you are unsure which EAO and groups of schools you would like to support, please see the website links noted in Step 2 below.
Upon completing that information, you will then be asked to attest your understanding of some of the rules with this credit; a few of these rules are noted below:
- Donations must be made within 30 days of the date of this tax credit reservation request.
- After 30 days, this reservation will expire, and a new request must be completed.
- The tax credit claimed cannot exceed 50% of the taxpayer’s state income tax liability for any year in which a portion of the credit is ultimately redeemed.
- Any credit remaining after the initial year in which the credits are claimed can be carried forward for four succeeding years.
- MOScholars tax credits are not transferrable, sellable, assignable, or refundable.
- Qualifying contributions only include checks drawn on a banking institution located in the continental U.S., money orders, and electronic fund transfers.
Upon successful submission and confirmation from the Missouri Treasurer, you will receive an email from the Missouri Treasurer’s Office confirming your reservation and providing you a confirmation number.
Step 2: Make a Contribution to a Qualifying EAO.
Within 30 days of receiving the confirmation email, you will need to provide this confirmation to the EAO and fund your contribution accordingly to that EAO. The Missouri Treasurer’s Office approves and certifies which organizations are qualifying EAOs. These organizations work with various schools to fund need-based scholarships. You may view the list of EAOs on the Treasurer’s website. This link also includes separate website links detailing the list of schools the EAO supports.
Step 3: The EAO Will Verify Your Contribution & Coordinate With the Treasurer’s Office.
Upon successful funding of your contribution, the EAO will submit your information to the Missouri Treasurer’s Office to document proof of payment. The Treasurer’s office will coordinate with the Missouri Department of Revenue (DOR) to confirm your income tax account is in good standing. If in good standing, and all documentation is in order, the Treasurer’s office will then issue a tax credit certificate with a benefit number to you directly (or the EAO, which will then provide this certificate to you).
Step 4: File Your Missouri Income Tax Return & Claim Your Approved Credit.
Timely file your income tax return with the DOR and claim your credit by filing Form MO-TC. You will need to include a copy of the certificate with your return.
Other Notes
Because the donation results in a 100% tax credit, none of the donation to the EAO is deductible as a charitable donation on your federal return.
The Missouri statue specifically notes qualifying contributions shall not include stocks, bonds, or other marketable securities, or property.
Credits are awarded annually based on donations made through the calendar year. Due to the administrative steps associated with obtaining this credit, it is encouraged that you initiate this process in early to mid-December to allow for timely processing so you can receive the credit for this calendar year.
The Missouri Treasurer’s Office has an FAQ site with additional information on the MOScholars program.
Conclusion
The MOScholars program can be a win-win opportunity for taxpayers who wish to support K-12 private education while lowering their state income tax liability. By following the rules and procedures outlined above, you can make a meaningful contribution to the educational future of Missouri’s qualifying students.
If you have questions or need assistance with individual, small business, or enterprise tax planning, please reach out to a professional at FORVIS.