If you are a Georgia taxpayer who is likely to owe more than $10,000 in deductible taxes paid in 2018, recent changes to tax law may create an opportunity for you to reduce your tax liability and help Georgia's struggling rural hospitals at the same time.
The Rural Hospital Tax Credit (RHTC) is a program designed to generate additional funding for Georgia's rural hospitals that have long suffered with limited budgets. The credit is not new—has been available since January 2017—but it was limited to $5,000 for single filers and $10,000 for filers who are married and filing jointly. Another limitation was that individual taxpayers had to contribute more than the $5,000 or $10,000 to maximize the credit because only a percentage of each dollar taxpayers contributed counted toward the credit. Corporations and fiduciary taxpayers also can participate and claim a credit up to 75% of their Georgia annual income tax liability (note that fiduciaries may not pass credits through to their beneficiaries).
New legislation, enacted in May, removed the limit on the amount of contributions taxpayers can make toward the RHTC and will become effective on July 1, 2018. The credit was also revised to be 100% of the contribution with the same effective date. Taxpayers can apply for the RHTC any time during the year, however for applications after July 1, taxpayers can apply for the RHTC in any amount. If granted by the state, any unused credit can carry forward for up to 5 years before being forfeited. This is significant because the Tax Cuts and Jobs Act (TCJA) has capped federal deductions for taxes paid at $10,000 for individuals. Such taxpayers who paid more than that in formerly deductible taxes will no longer be able to claim deductions over that amount. Those taxpayers may now be able to convert some of those non-deductible tax dollars into a charitable deduction by making contributions to the RHTC program.
The state has set a total-dollar limit for the Rural Hospital Tax Credit fund at $60 million this year. As stated earlier, the credit has not been widely used and the requests did not exceed $60 million in 2017. But with the removal of the limits to the amount taxpayers can request, coupled with the TCJA cap on deductions in 2018, it is more likely that the $60 million threshold could be met in 2018. For these reasons, it is imperative that you assess your tax situation and apply for the credit as soon as possible. We recommend you contact your advisor before the July 1st change.
If this is making your head hurt, know that WBL tax experts have studied the new laws and keep up to date on the ever-changing guidance issued by the state and federal governments. The important thing for you to know is that all the changes to federal and state tax laws mean that your old tax strategy may not be optimal. We are eager to help our clients and anyone with questions or concerns to assess your tax situation and recommend the best strategy for you. Please contact Todd Koransky, Tax Partner, with your questions.