75% deduction charity credit in Illinois

[Ready-4-ER-at-14]

I recently came across a tax credit plan in Illinois.
Diane Rado Contact Reporter Chicago Tribune

Per her article: "Corporate and individual donors can make contributions for private school scholarships and then get a 75 percent state tax credit, up to $1 million. That affects public education because state income taxes in large part are used for public schools in Illinois. "

The money can go to various charities and the school one does various zones within the state for private schools apparently. Chicago area seems to be an entire zone then about four or five horizontal bands across the state.


There is a bit of security involved in "reserving" your donation with the state, before any money will be accepted. Donations can be corporate or personal.

I have been trying to visualize how this would work with the new tax schedules and higher personal deductions for the upcoming tax year.
Certainly if a person were in say a 28 or higher federal bracket and had a huge amount of deductions it seems this could net tax savings more than the amount donated even if this were a 50% charity on federal taxes.

It seems like if I were to donate say 27k to this all the rest of my personal deductions would be deductible in 2018 on federal form. (amount is roughly what the married filing jointly credit was if you do not itemize)

I realize there are moral considerations involved if this reduces money to public schools. Personally I see both pros and cons re any contribution.

At this stage I am just trying to determine if this is net after federal tax neutral, gain, or loss. I will have state income tax and property tax and local taxes above the 10k allowance this year.


Writing this down helps to organize my thinking. It seems like a no brainer but I find it hard to visualize. Wish I had the 2018 tax software already.

 

[USGrant1962]

What you are describing does not sound like you are writing a check to a 501(c)3 qualified charity and you are receiving a benefit in the form of a tax credit. It sounds a lot like the New York scheme to mitigate the $10K SALT cap. The IRS is not going to allow that one to work.

Is this a new program? You might want to sit tight and see what the IRS does.

EDIT - regardless of what IRS does, if you are inclined to donate the state benefit makes it very worthwhile.

 

[braumeister]

It sounds a lot like the New York scheme to mitigate the $10K SALT cap. The IRS is not going to allow that one to work.

Agreed. I can't see this flying.

 

[Ready-4-ER-at-14]

I found an article by the tax foundation entitled New York's SALT Avoidance Scheme Could Actually Raise Your Taxes that explained a bit about what you were talking about.
They are indeed sort of similar.


I think I read that the Illinois thing is relatively new but only lasts for Seven years. I believe the current Republican governor was looking for a way to subsidize private schools with a voucher payment, and this was the work around they found. I think there may be a religious angle at play as well as the political thing.
School systems here tend to be quite democratic and unionized in the metro areas.