Pennsylvania Tax Credits
Pennsylvania was the first state to create educational tax credits, now allowing individuals and businesses to make donations to approved scholarship and educational improvement organizations and receive a dollar-for-dollar state tax credit for up to 90% of the donation. Donors are thus able to redirect their Pennsylvania personal or business tax liability to fund need-based scholarships.
Who Is Eligible to Participate?
Individuals and businesses who are subject to one or more of the following Pennsylvania taxes:
- Personal Income Tax (of employees, shareholders, or partners of corporations or partnerships)
- Corporate Net Income Tax
- Capital Stock / Foreign Franchise Tax
- Bank and Trust Company Shares Tax
- Title Insurance Companies Shares Tax
- Insurance Premium Tax
- Mutual Thrift Tax
What Are the Steps to Participate?
- Contact a Member School, or contact The Friends Collaborative (TFC) directly, to make a 2-year commitment for a scholarship donation through TFC.
- Login to the secure online portal: fill out the participant questionnaire (including a designation of which school/s you want the funds to go to).
- Sign the digital contract.
- Your ACH payment is then processed.
- In March of the following year, receive a K-1 form for use filing your PA tax return. Use this form to claim your 90% tax credit from Pennsylvania.
- In year 2, repeat steps 2-5!
What Is a Tax Deduction vs. a Tax Credit?
A TAX DEDUCTION “only” reduces the amount of income subject to taxes.
A TAX CREDIT is a stronger type of tax benefit. A tax credit:
- Directly reduces amount of taxes owed
- Provides a dollar-for-dollar reduction in tax liability
The Friends Collaborative works within the PA Educational Improvement Tax Credit program.
Who Is an Ideal Participant?
Individuals and Businesses, which:
- Want to support education & student scholarships
- Have PA state tax liability
- Seek a tax benefit
- Commit to contributing for two consecutive years*
- Have sufficient liquidity
*Contact us to ask about the availability of 1-year credits, which we are sometimes able to offer.