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I was recently at a gala fundraising event for an organization called Kids in the Middle.  Kids in the Middle is a not for profit group that helps children cope with the issue of their parents divorcing.   It’s an awesome organization and here’s a link if you want to learn more about them:  http://www.kidsinthemiddle.org/

 

One of the cool things about Kids In the Middle is that a donation to their organization can qualify you for a Missouri Youth Opportunity Tax Credit (YOP). If you live in Missouri, donating to a Missouri Tax Credit Organization is a really sweet deal.

 

Let me tell you about how it works.  Let’s say you want to donate $1000 to Kids in the Middle.  (The minimum donation for the tax credit is $100.)  When you donate money to an organization that qualifies for a YOP tax credit, you get a credit of 50% of what you donated against your Missouri taxes.  So if you donate $1000 to Kids in the Middle, you get $500 taken off of your Missouri income tax return next April.   That’s a pretty good bang for the buck right there isn’t it?

 

But, it’s even better than that.  If you itemize your deductions, your donation also counts as a charitable contribution as well.  So if you’re in the 25% tax bracket, then you’re saving another $250 on your federal taxes, plus another $60 off of your Missouri taxes on top of the $500 you’ve already saved.   So if you’re in the 25% tax bracket, your $1,000 donation really only cost you $160!  If you’re in a higher tax bracket, your donation will cost you even less!  How cool is that?

 

Full disclosure, (I’m a tax geek can‘t help it) because you’re going to pay lower state taxes for doing this in 2013, you’re going to have a lower state tax deduction on your 2014 federal tax return.  That means your federal taxes will be $125 higher in 2014.  You’re still coming out way ahead, but I just needed to point that part out.

 

When I was at the gala, people were donating left and right–mostly because the charity is such a good organization, but I think the YOP tax credit really sweetens the pot.  And afterwards, people were asking how do you claim the tax credit anyway?  That’s something I can help you with.

 

Claiming the Missouri tax credit isn’t difficult at all!  The important thing is that you’re going to need the form that you’re mailed authorizing the tax credit.  You’ve got to have that form so once it’s mailed to you, don’t lose it.  You need the code on there and you need to mail it in with your tax return.  With Kids in the Middle, it’s going to be a two step process.

 

First, after you make your donation, you’ll receive a notification letter and an application for the tax credit.  You’ll have to fill out that form and mail it back to Kids in the Middle.  Then you’ll receive your Certification letter from the Missouri Department of Economic Development.  That’s the form you’ll need for your tax return.  Don’t lose that.  Your regular receipt from Kids in the Middle won’t work on your tax return.  You must have the Certification letter for the tax credit.

 

When tax time rolls around, you’re going to fill out form MO-TC.  Here’s a link to see what it looks like:  http://dor.mo.gov/forms/MO-TC_2011.pdf As you can see, there’s not much to it.  The amount of the tax credit will get carried over to line 37 of your Missouri 1040 tax return.

 

You will have to mail your Missouri return instead of e-filing because you’ll have to attach the certification letter along with the tax credit form to your tax return.  But that’s about all there is to it; get a form, complete the MO-TC document, claim the deduction, attach the paperwork to your tax return, and mail.  It’s that easy to do a really good thing.