NH Education Tax Credit Calculation
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New Hampshire's Education Tax Credit statute, passed in 2012 and substantially amended in 2018, grants an 85% tax credit for contributions to a nonprofit scholarship that uses the money to contribute to tuitions at private, religious and home schools. Essentially, a business that owes Business Profits Tax or an individual who owes New Hampshire interest and dividend tax can write a check to fund private school tuitions or home schooling costs instead of writing it to the State of New Hampshire Department of Revenue Administration.
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Here's how it works.
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A $10,000 contribution could reduce a state taxpayer's bill by $9,350 and the taxpayer's federal taxes by $221, leaving $429 for the business to pay from its own funds.
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A buisness that donates:and has taxable profits in NH of:would reduce its state and federal taxes by: and pay this amount itself:
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$10,000$100,000$9,563$438
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Without ContributionWith ContributionNet Savings
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1, Tax Credit Calculation
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85% tax credit earned$0$8,500
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a. Current year business tax credit$0$7,650$7,650
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b. Balance of Tax Credit to be Applied to Additional NH Business or Interest and Dividend Tax or Carried Forward to Another Tax Year$0$850$552
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2. Federal Income Tax
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3. Taxable Income before ETC Contribution & NH taxes$100,000$100,000
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4. less: Contribution to ETC (Net of Tax Credit Benefit)$0-$10,000
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5. less: NH Business Profit Taxes-$8,500$0
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6. Adjustments to Taxable Income (3+4+5)-$8,500-$10,000
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7. Net Federal Taxable Income$91,500$90,000
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8. Federal Income Tax Rate34%34%
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9. Total Federal Income Tax Liability$31,110$30,600$510
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10. NH Business Profit Tax
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11. Net New Hampshire Taxable Income$100,000$90,000
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12. NH Business Profit Tax Rate8.5%8.5%
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13. Total NH BPT Liability$8,500$7,650$850
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14. Savings on a voucher program donation$10,000 $9,563
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Total reduction in NH taxes $9,053
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_________________________________________________________________________
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Cost to the taxpayer of the contribution to a scholarship organization
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Net cost of the contribution of:$10,000is$438
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As a percentage, that is: 4.38%
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Notes:
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These calculations are based on the New Hamsphire CDFA tax calculation model.See the CDFA model here.
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i. Line 5: NH tax net of Tax Credits is equal to line 13 less line 1.
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ii. Line 11: Net NH Taxable Income is equal to line 3 less line 4 in the Federal Income Tax section.
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iii. A 5 year carryforward is allowed if the total amount of the tax credit is not used in the year it is issued.
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iv. For Federal tax purposes there may be limitations that apply to your business.
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v. Contributors are responsible for consulting with their own tax advisors to determine the impact of tax credits on their finances.
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