Looking for a smart way to reduce your tax burden while supporting education? The Alabama Accountability Act (AAA) offers taxpayers a unique opportunity to claim a state income tax credit by contributing to a Scholarship Granting Organization (SGO). These organizations fund scholarships for students attending non-public schools across Alabama, and your donation can offset up to 50% of your state tax liability (capped at $50,000 per taxpayer).
Here’s the kicker: this isn’t just a state tax win. With the 2017 Tax Cuts and Jobs Act capping state and local tax (SALT) deductions at $10,000 on federal returns, AAA contributions provide a workaround. Your donation to an SGO qualifies as a charitable contribution—fully deductible on your federal return—rather than a limited state tax deduction. For example, a $10,000 contribution could wipe out $10,000 of your Alabama tax liability while boosting your federal deduction by $10,000, potentially saving you $3,500 at a 35% federal tax rate.
How It Works – A Simple Example:
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Without AAA Contribution:
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State tax liability: $20,000
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Property taxes: $5,000
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Total: $25,000
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Federal SALT deduction: $10,000 (capped)
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With $10,000 AAA Contribution:
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State tax liability reduced to $10,000
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Property taxes: $5,000
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Total state/property taxes: $15,000
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Federal SALT deduction: $10,000
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Federal charitable deduction: $10,000
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Total federal deduction: $20,000
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Extra tax savings: $3,500 (at 35% rate)
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Alabama allocates $30 million annually for these credits, distributed first-come, first-served via the My Alabama Taxes (MAT) portal. This program is popular, and funds run out fast—so act quickly! Ready to get started? Follow these steps:
How to Claim Your AAA Tax Credit
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Set Up Your MAT Account:
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Visit myalabamataxes.alabama.gov and click “New User? Sign Up Here.”
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Select “Individual Income Tax,” enter your Social Security number and last year’s Alabama AGI.
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Create a username, password, and security question—keep these safe!
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Complete your profile and note your Authorization Code (sent via email/text).
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Make Your SGO Donation:
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Log into MAT with your credentials and Authorization Code.
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Click “Donate to SGO,” choose an approved organization, and enter your donation amount.
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Print your confirmation and mail your check (from your personal account) the same day.
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Don’t miss out—this is a win-win for your taxes and Alabama’s students!