The 2019 North Dakota Legislature expanded tax credits for non-public schools, which means charitable gifts to Catholic schools in N.D. are now eligible for a special N.D. tax credit. This is big news to those who make annual or regular contributions to their favorite Catholic School.
North Dakota resident taxpayers (individuals, corporations or fiduciaries) are allowed a non-refundable credit equal to 50% of the amount of the contribution but limited to 25% of the taxpayer’s total income tax or $2,500, whichever is less (ND Century Code 57-38-01.7). There is no carry forward of these credits when filing returns, so taxpayers will likely want to apply these credits before applying other available credits.
Each year, a donor may take one tax credit for a charitable donation to a Catholic elementary school and another tax credit for a charitable donation to a Catholic high school, if they make two separate charitable donations. The credits for charitable donations begins with any donation made on or after Jan. 1, 2019.
For example, John and Mary figure they will owe $1,000 income tax to N.D. for the year 2019.
With some clever planning, they make two donations: one $500 donation to a Catholic elementary school and another $500 donation to a Catholic high school. Because of these donations, they will now earn a $250 ND Tax Credit for each gift. They now can reduce their tax bill by $500 (2 x $250), and only have to pay the remaining $500 in income tax.
Here are the kinds of donations that will and will not work for this tax credit:
Donations to the Catholic school’s annual appeal or general operating fund: yes
Donations to the Catholic school’s capital campaign: yes
Donations to the Art Department, Music Department, Athletic Club: no
School tuition payments: no
As usual, for your own unique tax situation, please consult your accountant or a professional tax advisor.
Endowment contributions Additionally, tax credits are still available for contributions to qualified N.D. endowment funds. Gifts of $5,000 or more to a qualified endowment fund (school related or not) are eligible for a tax credit equal to 40% of the charitable gift. A qualified endowment fund may be established to provide scholarships. The maximum credit is $10,000 for an individual; $20,000 for married individuals filing a joint return; and $10,000 for corporations and pass-through entities. Any unused portion of the credit can be carried forward for up to three taxable years, so this credit can be applied
after the non-public school credits (ND Century Code 57-38-01.21). As usual, for your own unique tax situation, please consult with your accountant or a professional tax advisor.