There are now greater educational opportunities for families in need with the creation of the “Invest in Kids Credit.” In 2017, Illinois enacted the Invest in Kids Scholarship Tax Program. The program gives parents the option to choose which non-public school located in Illinois best meets the educational goals and needs of their children. To provide funding for the scholarship program, Illinois individuals and businesses make contributions to “Scholarship Granting Organizations” (SGOs). The individuals and businesses receive a 75% Illinois income tax credit for their contributions to SGOs, but they must follow the specific steps in the process outlined below.
How to Contribute to this Program
In order to obtain this new 75% tax credit, Illinois individuals and businesses must follow certain required steps. If the following steps are not adhered to, no credit will be available:
- First Step – If you plan to contribute to the Invest in Kids program, you must first apply to do so. You must request approval to make a contribution for this credit prior to making your contribution. Applications for the 2018 tax year will be available starting at 8:00 AM, Tuesday, January 2, 2018. The application must be requested online through MyTax Illinois. Important: You must have a registered MyTax Illinois account for filing either individual income tax or business income tax to be able to apply for approval to make a contribution.
- Second Step – Once your application has been submitted via your MyTax Illinois account, the Department will confirm if credits are available. The State can issue up to $75 million in the Invest in Kids tax credits per calendar year, and these will be distributed geographically throughout the five regions in Illinois (Cook County, Northern Counties, North Central Counties, Central Counties, and Southern Counties). Income tax credits are awarded on a first-come, first-served basis, and approval is granted as long as regional and statewide limits have not been met. If credits are available, the Department will issue you a “Contribution Authorization Certificate” (CAC). The CAC will be issued electronically to your MyTax Illinois account within three business days of approval of your application.
- Third Step –You must make your contribution to the Scholarship Granting Organization (SGO) within 60 days after you are issued your CAC. You must provide a copy of the CAC to the SGO. (Please click here for a listing of the Illinois approved SGOs). Then, within 30 days of receiving your contribution, the SGO will issue you a Certificate of Receipt (COR) through your MyTax Illinois account.
How to Claim Your Illinois Invest in Kids Tax Credit
If you follow all of the above steps in the process and your credits have been approved, then your contribution can be claimed beginning with your 2018 income tax returns. The following other items should be noted related to the filing of your Illinois tax returns for these credits:
- Important Note: these Invest in Kids tax credits cannot be claimed on your Illinois tax return if you claimed any part of your contribution as a federal income tax deduction.
- The Invest in Kids Credit cannot exceed $1 million per taxpayer, per year.
- Individuals who are married and filing a joint return in Illinois are considered to be one taxpayer for purposes of making qualified contributions for this credit.
- If you cannot use all of your Invest in Kids income tax credit in a year, you are not allowed this excess as a refund. Instead, any excess credit amount for the year may be carried forward and applied to your Illinois tax liability in the subsequent five taxable years. Excess credits carried forward do not require any additional approval process.
Finally, it is important to keep in mind that if you plan to make another contribution to Invest in Kids in a later year, you must apply again. An application is needed for every year in which you plan to make a contribution.
For additional information about the Invest in Kids Credit please visit this link from the Illinois Department of Revenue.
To learn more about how to contribute and maximize your Invest in Kids Credit, please contact your local Sikich advisor.