Georgia Private School Tax Credit/ G.R.A.C.E. Scholars, Inc. Frequently Asked Questions

Who can donate?

Any Georgia taxpayer may make a donation and qualify for the Georgia Private School Tax Credit, assuming the State cap hasn’t been met.

How does it work?

A taxpayer in Georgia can “redirect” part of his Georgia income tax to a student scholarship organization (SSO) to provide scholarships for students to attend private schools. This “redirect” occurs because the tax payer receives a 100% tax credit against his GA tax liability for the amount donated to GRACE. Therefore, money that was going to pay taxes has been “redirected” to support Catholic education for those in need.

How much can I donate?

A single taxpayer can “redirect” up to $1,000.
A married couple filing jointly can “redirect” up to $2,500.
A married couple filing jointly, that pays AMT (alternative minimum tax) can “redirect” up to $ 2,500 and save $725 (due to a tax savings of $3,225 for both federal and state).
A “C’ Corporation can “redirect” up to 75% of their total Georgia state tax liability.
Partnerships, LLCs and Sub-S corporations are subject to the owners’ individual limits.

Can corporations, partnerships, Sub-S corporations, or LLCs donate?

Yes. A “C’ Corporation can “redirect” up to 75% of their total Georgia state tax liability. Partnerships, LLCs and Sub-S corporations are subject to the owners’ individual limits.

What is the deadline to donate to GRACE for a tax credit?

Donations to GRACE may be made at anytime. However, if you would like to apply your tax credit to the current year, you must make your contribution by December of the current year. Please note: all donations to GRACE Scholars must be preapproved by the state. Therefore, GRACE recommends that you complete and send your TP1 by mid-October to begin the donation process.

Where is this credit explained in the Georgia Law?

The tax credit guidelines are listed in the Georgia Code Title 48 Chapter 7-29.16. The details of the qualified Student Scholarship Organization are listed in the Georgia Code Title 20 Chapter 2A.

Will this trigger an audit of my return?

No. The credit is applied against your Georgia income tax liability, and is preapproved by the state of Georgia. It is processed just like a tax payment.

How does a tax credit differ from a deduction?

A tax credit is significantly more beneficial than a deduction. A credit reduces your Georgia taxes dollar-for-dollar while a deduction reduces the taxable income upon which taxes are calculated. If you claim the tax credit on your Georgia return, you cannot also claim a deduction for the same donation on your Georgia return. However, you may be able to claim the payment as an itemized deduction on your Federal income tax return, thus lowering the amount of Federal tax paid.

Can I specify that my donation be used for scholarships at a specific Catholic school?

Yes. All of the Catholic schools in Georgia are eligible to receive funding through the G.R.A.C.E. Scholars, Inc.

Can I specify that a particular student receives a G.R.A.C.E. scholarship?

No. Donors may specify at which qualified school they desire the contribution to be distributed, or the most Economically Disadvantaged Students only, but not for specific children or families.

Why must I get preapproval from the state?

Georgia has allocated $50 million for the entire program. The preapproval form ensures that the cap hasn’t been reached, and that there are funds available to reimburse the total amount of your donation.

How do I determine what my tax liability is?

By reviewing your previous year state tax return, you can determine what your liability was last year. This is the total of your tax and not necessarily the amount deducted from your paychecks, the amount refunded to you, or the amount due.

What if I make a tax credit eligible contribution but do not owe that much in Georgia taxes?

If your Georgia income tax liability is less than the tax credit available to you, you may carry the excess forward for five years. If the amount of your tax credit, income tax withholdings, and estimated income tax payments exceed your Georgia income tax liability, the state of Georgia will refund the excess to you.

How do I process the state tax credit on my Federal return?

Federal taxes are filed normally, with the GRACE Contribution treated as a charitable deduction. In the next year, the year the credit is received, the donation is added to the total Federal income, costing you 6% of the original donation amount in taxes. However, this 6% will be counteracted if you chose to donate in the same year.

When will I receive the state tax credit for my contribution to G.R.A.C.E. Scholars?

For contributions made during the current calendar year, the tax credit will reduce the current year’s tax liability.

When is the scholarship money distributed?

Money donated prior to May 31 will be awarded to students in August of that year. Money donated after June 1 will be awarded to students in August of the following year.

Who qualifies for the financial aid?

Any resident entering a Catholic school for the first time from a Georgia public school, or a child eligible to enter kindergarten (or pre-kindergarten if an accredited program) with financial need may qualify for a G.R.A.C.E. Scholars, Inc. scholarship.

Can the same student receive scholarship money for more than one year?

Yes. Once a G.R.A.C.E. scholarship is awarded, the student will continue qualifying for the aid as long as the family maintains financial need and the student remains in good academic standing with the school.

How much is a typical scholarship?

Award amounts are dependent on both the amount of funds available and the family’s need.

Is there a maximum that a student can receive?

Yes. The maximum scholarship is no greater than the identified financial need.

How do I apply?

Please contact your local Catholic school for information on applying for a G.R.A.C.E. Scholarship.

What is the deadline to apply for a GRACE Scholarship?

GRACE Scholars must receive a completed Family Registration Form from participating schools by March 15. Therefore, interested families should request financial aid information and undergo the financial review process in February. Please note: applications for a GRACE Scholarship are turned in directly to the school that you desire your child to attend.

If you have any additional issues or questions, please refer the Georgia Department of Revenue website, https://etax.dor.ga.gov/inctax/taxcredits.aspx, the Georgia Department of Education, http://public.doe.k12.ga.us/pea_policy.aspx?PageReq=PEAHB1133, or feel free to contact G.R.A.C.E. directly.