‘Tis The Season of Giving – and Getting!

By Rob Sellers, CPA

With the Christmas season and year-end giving upon us, give your clients the one thing that they want most from their CPAs...a tax break!  This month, your clients can provide the gift of education – either for their favorite public or private school – and take away a tax credit and deduction that is bigger than any charitable giving available.  This is all courtesy of our Oklahoma Legislature!

Deserving lower-income students across Oklahoma will benefit from your and your clients’ generosity but the financial cost is minimal compared to dollars expended since your tax bill will be reduced for this donation. 

The Equal Opportunity Education Scholarship Act provides donors with a 50 percent state income tax credit on their donated amount. Donations must be made to an authorized scholarship granting organization (SGO), education improvement granting organization (EIGO), public school district (PSD) or public school foundation (PSF). A donor who is willing to give the same amount for two consecutive years is eligible for a 75 percent tax credit off their Oklahoma income tax.

Tax credits are limited to $1,000 for a single taxpayer, $2,000 for a married couple and up to $100,000 in tax credits for a qualified business entity.  Pass-through entities can flow the eligible tax credits to their partners and shareholders pro rata on the owners’ personal tax returns. In 2021, the legislature increased the tax credits eligible for our K-12 education entities to $25 million for SGOs and $25 million for EIGOs, PSDs and PSFs – a total of $50 million in tax credits.

In addition, your donation is eligible for a deduction if you itemize on your personal tax return. The amount of the credit received is deemed as a state tax payment and can be deducted as a state and local tax deduction, subject to the $10,000 SALT deduction limitation. The amount of your donation, net of the tax credit received, is deductible as a charitable contribution. The potential exists that the donated amount could cost the donor little to no money with the tax benefits being returned for supporting families to afford the best education for their children.

Donating to these entities, authorized by the Oklahoma Tax Commission, provides an opportunity for individuals and business owners to redirect their tax dollars. You and your clients can turn taxes into tuition for our lower-income students and innovative curriculum for public school students while earning significant tax credits and deductions for the upcoming tax return.

As an example, a family with an Oklahoma taxable income of $75,000 will generate a state tax liability of approximately $3,100. If the family donates $2,000 to a SGO/EIGO/PSD/PSF authorized to accept these donations (and pledges to give the same amount next year), the family will get a 75 percent income tax credit of $1,500 towards their $3,100 tax liability – a net of $1,600 owed to the state. Any withholdings and estimated tax payments over $1,600 will be refunded to the taxpayer. The credits offered by these organizations are nonrefundable tax credits, so any tax credits more than the tax liability can be carried over to be used for three years.

SGOs distribute thousands of scholarships a year to low-income Oklahoma students to assist with affording their private K-12 education expenses. Public school organizations provide innovative education curricula that their normal school budgets would not otherwise be able to offer. Donors that fund these organizations make a direct and meaningful impact on the lives of the children in our state.

Most of the organizations are for specific schools or will allow the donor to designate their gifts to specific schools (but not individual students). This provides donors with the flexibility of providing funds to schools in their local communities or schools with a mission they are passionate about, while still getting the biggest tax benefits available.

Below is a list of some of the organizations that can provide you and your clients with tax benefits while providing learning opportunities for students throughout Oklahoma:

* - This is not intended to be a complete list of organizations authorized to take donations under the Equal Opportunity Education Scholarship Act. Consult your local public school to determine if they are participating in this program.

Our students, teachers and schools need your help. Your clients need the opportunity to direct their hard-earned money to places that they feel will make their community better. Taxpayers of Oklahoma can do both through these groundbreaking programs that help bring both goals together and use the tax incentives provided.

Work with your clients and business associates to give the gift of education this year, which will be the biggest tax break available. Only a couple of weeks remain so don’t delay. Your donation must be postmarked on or before December 31 to count for the 2023 tax year. This could be the tax break your clients, friends and family may need to complete their year-end.  

Rob Sellers has been active in the school choice area in Oklahoma since 2010, having served as the former executive director of the Opportunity Scholarship Fund (OSF) for five years. OSF is a scholarship-granting organization, or SGO, that provides scholarships to Oklahoma’s low-income K-12 students to assist families in affording attendance to accredited private schools in our state.  Rob, a CPA for almost 40 years, consults with other SGOs and private schools to assist them in taking advantage of programs, including the new Parental Choice Tax Credit, that assist their families in attending their schools. He also assists clients with financial, operations, systems, tax and business-related matters. 

Sellers is a graduate of Oral Roberts University and a member of the Oklahoma Society of CPAs (OSCPA). He is a past OSCPA board member (two terms) and chairman of various OSCPA committees. He currently serves as a trustee for the OSCPA’s CPA-PAC. Rob is also a past recipient of the OSCPA’s Outstanding CPA in Business and Industry award. Besides his work and Society commitments, Rob is actively involved in several civic and charitable organizations in the Tulsa and Oklahoma City area.