Montana Endowment Tax Credit

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Montana Endowment Tax Credit.

The Montana Endowment Tax Credit allows donors to pay less in Montana state income taxes when they give a qualifying planned gift to a Montana charitable endowment. The incentive is 40 percent of the gift’s federal charitable deduction, up to a maximum $10,000 tax credit, per year, per individual, and a credit of 20 percent of a direct gift by a qualified business, up to a maximum of $10,000 per year. 

An endowment is a fund held by a tax-exempt organization where the principal of the fund is not wholly expendable. Only the interest and appreciation earned in an endowment fund can be used for current operations. Endowments are established to help Montanans meet long-term needs in our communities for education, social services, health care, economic development, the arts and more.

Individual Planned Gift:

Individuals who make a planned gift to a qualified Montana endowment fund will receive a tax credit of 40% of their gift, with a maximum credit of $10,000 ($20,000 for joint filers).

Business/Corporation Outright Gift:

Businesses and corporations that make a direct gift to a qualified Montana endowment fund will receive a tax credit of 20% of their gift, with a maximum credit of $10,000.

Here is an example of how this tax credit can work for you:

You contact Marcy with the Missoula Community Foundation and tell her how much you would like to donate – for this example we will use $20,000. She will show you the list of qualified Montana nonprofit endowment funds and ask you to choose which funds you would like to benefit from your gift. You may select either one or several funds or, you may set-up your own named permanent endowment fund. Marcy will collect the information from you that she needs to draw up your paperwork and set up a deferred gift annuity, an easy planned gift that will allow you to take advantage of the tax credit.

For example, with a gift of $20,000, you would receive BOTH a federal charitable deduction of $18,057 and a Montana State tax credit of 40% of this gift (based on a joint gift) totaling approximately $7,222. This amount would be a direct credit to the taxes you owe to the State of Montana. (The amounts are hypothetical and will vary depending on life expectancy, age at the time of the gift and your income tax level). The Missoula Community Foundation will hold this gift in an annuity fund where it is invested and grows with earnings. Once you release the contract on the deferred gift annuity, it will roll into the qualified endowment fund(s) you have designated with interest and be put to work benefiting our community. The gift must be held in a separate annuity fund for a minimum of five years before it can be reassigned to your selected charity or named fund.

This is just one example of how you can take advantage of the Montana Tax Credit. There are many ways to set-up a planned gift that can help you with your end of year tax planning.