In Virginia, both the Neighborhood Assistance Program (NAP) and the Education Improvement Scholarships offer a state tax credit of up to 65% of your total charitable contribution. These tax credits can then be used on your Virginia state tax return to reduce your tax owed dollar-for-dollar.
Luckily too, reporting and using your tax credits on your state tax return is very straightforward. According to the Virginia.gov frequently asked questions on the topic, “Tax Credits are reported on Schedule CR filed with the Virginia Department of Taxation (TAX).”
Tax credits of many different types, including NAP credits, are reported on Virginia Schedule CR. The Virginia Department of Taxation seems to consider the form self-documenting, as the instructions are about the various types of credits and not how to fill out the form.
Luckily, the form is organized by type of tax credit and the NAP credit section of Schedule CR is only five lines long, which are:
PART 3 – NEIGHBORHOOD ASSISTANCE ACT CREDIT
A Authorized amount of Neighborhood Assistance Act Credit.
B Carryover credit from prior year(s).
C Add Lines A and B.
D Credit allowable this year: Line C or balance of maximum credit available, whichever is less.
E Carryover credit to next year: Line C less Line D (applicable only if within 5-year carryover period).
In other words, Line 3A is where you put the total tax credits you received this year. If you are giving such that you use all of the credits the year you acquire them, then this is effectively the only line that requires effort.
You report the amount of credits received on Part 3A, that gets summed into 3D, 3D is then summed into 1A, and 1A is then integrated into Virginia Form 760 (the main tax return) on line 25 where it asks for “Credits from enclosed Schedule CR, Section 5, Part 1, Line 1A.” Form 760, Line 25 is then summed into line 26 which is subtracted from your Line 18 total tax to determine the total tax you owe.
In this way, the NAP credits you receive from your charitable giving reduce the tax you owe on your Virginia return dollar-for-dollar.
For more specific details about the NAP credit program, you may appreciate reading the instructions for the Schedule CR, which reports:
The Virginia Neighborhood Assistance Act provides tax credits to individuals and businesses that make qualified donations directly to pre-approved Neighborhood Assistance Program organizations whose primary function is to provide educational or other qualified services for the benefit of low-income families. Individuals may receive a credit for a donation of money or marketable securities to an eligible organization. … Any unused tax credits may be carried forward for the next 5 taxable years.
For a list of approved organizations or additional information, contact the Virginia Department of Social Services, Neighborhood Assistance Program, 801 E. Main Street, Richmond, VA 23219-3301 or the Virginia Department of Education, 23rd Floor, P.O. Box 2120, Richmond, VA 23218-2120, Attn: Neighborhood Assistance Tax Credit Program for Education or email firstname.lastname@example.org.
In this way, it is your responsibility to keep track of NAP tax credits you don’t use this year. Those unused credits can carryover to the next year for up to 5 years.
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