insight magazine

Understanding the Tax Benefits of Illinois’ Invest in Kids Act

This lesser-known program helps Illinois taxpayers maximize their charitable giving while supporting low-income students. By Daniel F. Rahill, CPA, JD, LL.M., CGMA | Digital Exclusive - 2022

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Scholarships for kids; tax credits for you. That’s the premise behind Illinois’ Invest in Kids Act. Passed in 2017, this bipartisan act created the Invest in Kids Scholarship Tax Credit Program, which is dedicated to ensuring Illinois’ economically disadvantaged elementary and secondary students receive scholarships to attend qualified, non-public schools in Illinois that meet their educational needs.

For Illinois taxpayers seeking ways to make meaningful charitable contributions, this philanthropic investment ensures one’s money is working harder, smarter, and for a good cause. Since the act was passed, thousands of Illinois’ taxpayers have contributed to the Invest in Kids Tax Credit Scholarship Program, supporting more than 28,000 scholarships worth more than $250 million.

How Does the Tax Credit Scholarship Program Work?

The Invest in Kids Tax Credit Scholarship Program offers Illinois taxpayers a 75 percent income tax credit for contributions made to qualified Scholarship Granting Organizations (SGOs), like Empower Illinois, an SGO that works with more than 90 percent of the recognized private schools in Illinois. The SGOs then provide scholarships to students whose families meet the income requirements so they can attend qualified, non-public schools and technical academies in Illinois. In contributing to the qualified SGO, donors can often select the school or schools they wish their gifts to go to, allowing them to support the specific communities they care about.

As an example, an Illinois taxpayer who contributes $10,000 to one or more SGOs would receive a $7,500 state income tax credit. The Invest in Kids Tax Credit Scholarship Program allows individuals and businesses to donate up to $1.33 million each year to receive up to a $1 million state income tax credit, which can be carried forward for up to five years.

Who’s Eligible to Participate?

Both individuals and businesses with Illinois state income tax liabilities are eligible to participate. Individuals who are married and filing a joint tax return are considered one taxpayer for purposes of making qualified contributions. The Illinois Department of Revenue can issue up to $75 million in tax credits per calendar year, which are distributed geographically throughout the state. Income tax credits are awarded on a first-come, first-served basis, and approval is required and granted as long as the regional and statewide thresholds haven’t been met.

What Is the Contribution Process?

There are four steps for individuals and businesses to follow:

  1. Establish a MyTax Illinois account.
  2. Apply to receive a Contribution Authorization Certificate (CAC).
  3. Within 60 days of receiving your CAC, make your contribution to your selected SGOs.
  4. Claim your tax credit.

As you can see, the Invest in Kids Scholarship Tax Credit Program offers Illinois taxpayers a meaningful way to maximize their charitable giving each taxable year while supporting the financial and educational needs of Illinois’ economically disadvantaged families.

Illinois CPA Society member Daniel F. Rahill, CPA, JD, LL.M., CGMA, is a managing director at Wintrust Wealth Management. He is also a former chair of the Illinois CPA Society Board of Directors and a current board member of the American Academy of Attorney-CPAs.

Please note, the information provided here was accurate at the time of creation, and is intended to be informative and educational, not to be mistaken as legal, accounting, or tax advice. The description and examples provided are for illustrative purposes only and should not be used as the sole example.

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