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“Education is the most powerful weapon which you can use to change the world.”

– Nelson Mandela

As many of us anxiously await the dawn of a new year, we would like to share a resolution that may be worthy of your consideration.  Unknown to many, as part of the Alabama Accountability Act, the state of Alabama sets aside up to $30 million each year for Scholarship Granting Organizations (SGO).  This program provides a tremendous opportunity for Alabama taxpayers to consider redirecting up to 50% of our state tax liability to an SGO.  Redirecting those state tax dollars designates that portion for education in our local area instead of going to the Alabama Department of Revenue.  In short, an SGO provides K-12 scholarships to pay tuition for qualifying low-income students so eligible families in Alabama have the opportunity to choose the education that best fits their child’s education needs.

Approved Organizations

Here is a list of Approved Scholarship Granting Organizations in Alabama.  As a resident of Huntsville and Madison County, Rocket City SGO is the choice for many in our area.  Scholarships for Kids is another notable option and one of several worthy organizations approved and located in the Jefferson County area.  The websites for both of these organizations are beneficial in explaining the programs in more detail. No matter what part of the state you reside, as long as you are an Alabama taxpayer, you can contribute to any on the approved list.

Action Steps

The process to take advantage of this opportunity is fairly straightforward.  Here are the main steps:

    1. Go to the Alabama Department of Revenue website and, if you do not already have an online account, register by setting up a My Alabama Taxes (MAT) account.
    2. Once you log in, go to “Report a donation to an SGO.”
    3. After completing your personal information, choose the SGO of your choice from the menu titled “SGO Name.”
    4. Fill in your donation’s desired amount, up to 50% of your estimated state tax liability.
    5. Mail your personal check made payable to your selected SGO to their address as listed on their website or from the approved list previously referenced.
    6. You will immediately receive a confirmation number, so keep that for your tax records until you receive a letter or email with further confirmation of your donation.

Important Reminders

When it is time to file your taxes, you will have an Alabama state tax credit in the amount of your donation.  This results in an increase in any refund you are due or a reduction of any amount owed by the same amount you contributed to the SGO.  Also, there is no need to estimate 50% of your Alabama tax liability exactly.  If you were to contribute more than 50% of your actual Alabama tax liability and cannot use it for the current tax year, you can carry it forward and use it next year.  So, no worries about using it or losing it.

For further questions, please contact a Scholarship Granting Organization in your area or reach out to a Bridgeworth advisor.

This content does not constitute legal, tax, accounting, financial, or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial, or investment professionals based on your specific circumstances. We do not make any warranties as to the accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.