California recently passed a new personal and corporate California tax credit called the College Access Tax Credit (CATC). If you donate to the College Access Tax Credit Fund, you can offset your California taxes by 60% (for 2014) of the amount of the donation. In addition, the donation qualifies as a charitable deduction on your federal tax return.
The CATC Fund was created to provide additional Cal Grants to eligible low income college students in California.
Other facts about the new credit:
- The CATC is limited to 60% of the donation in 2014, 55% for 2015 and 50% for 2016. For example, if you donate $10,000 to the CATC Fund in 2014, you would have a $6,000 California tax credit available to offset your California tax liability and a $10,000 charitable donation for federal tax purposes. There is no charitable deduction for the $10,000 in California since a credit was received.
- Your donation must be certified by California Educational Facilities Authority (CEFA) in the California Treasurers office. Information and the application are available at the CEFA website here. CEFA must certify that the contribution amount eligible for the CATC credit within 45 days following receipt of the taxpayer’s donation to the CATC Fund. A maximum of $500 million in contributions can be certified in 2014.
- If the credit exceeds the amount of tax owed in that year, the excess credit can be carried forward up to six years.
- The credit does NOT offset California alternative minimum tax.
Check with your Henry & Horne tax professional to see if the new CATC credit benefits your California tax situation while you help low-income California college students.
By Melinda Nelson, CPA