Getting A 91% Charitable Tax Deduction In Virginia – Neighborhood Assistance Program
If you live in Virginia and are searching for charitable organizations to give to, you may want to consider the Neighborhood Assistance Program (NAP). This program reviews applications from 501(c)(3) organizations following a strict criteria list that ensures your donation is well spent.
Special Tax Benefits
There are also pretty large tax incentives to donate to these charities. According to their website, “In return for [your] contributions...individuals may receive tax credits equal to 65 percent of the donation that may be applied against their state income tax liability.” That’s right - a 65% dollar-for-dollar credit on your Virginia taxes!
I have utilized this program for clients before and in my experience, it is best to apply within the first week the application process is open, which is usually July 1st. There is a set amount of tax credit approved by Virginia and once the credit has been used up, you are not able to receive a tax credit even if you donate to an approved organization.
There are a few best practices to consider
The minimum donation has to be $500 to be approved.
Fill out and submit a Contribution Notification Form (CNF) as soon as applications open up, usually on July 1st. Once the CNF is received it takes approximately 8 weeks for the NAP office to review the document and send you a certification of your tax credit.
You can donate cash or stock.
You are not guaranteed a credit - although in my experience individuals who apply on July 1st are likely to receive one.
Example - John donates $4,000 to a food bank. If approved, he may receive a credit to reduce his state taxes by $2,600 ($4,000 x 65% credit). In addition, he can also deduct it from his federal taxes and he is in the 24% tax bracket, reducing his federal taxes by $960 ($4,000 x 24%). For his $4,000 donation, he has received back $3,650, a 91% benefit!
In addition, I have had clients donate appreciated stock to the charity. In this example, if John donated $4,000 of stock that he paid $1,000 for, he would get an additional $600 tax benefit ($3,000 unrealized gain avoided X 20% capital gain tax rate), for a total benefit of $4,250! John would be better off financially for having made the gift than if he had not, and he was able to help a great cause!
Here is a full list of approved organizations for this year.
Thank you for reading,
Alex
This blog post is not advice. Please read disclaimers.