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The Neighborhood Assistance Act Offers Tax Credits for Contributions

Help Yourself While Helping Others

What better way to take a bite out of your tax bill than by contributing to the health of your community? Across the country, municipalities encourage their constituents to contribute by offering tax credits. Tax credits are generally considered to be better than tax deductions because they directly reduce the amount of tax you owe, while the effect of a tax deduction on your tax liability depends on your marginal tax bracket.

In Delaware, the Neighborhood Assistance Act (NAA) Program encourages businesses and individuals who have a Delaware state tax liability to invest in programs serving impoverished neighborhoods or serving low- and moderate-income families. In exchange for a qualified contribution, the NAA program provides state tax credits equal to 50% of the investment.

There Are Some Limits

Even though you may be generous to a fault, in Delaware the maximum tax credit available to any taxpayer is $50,000 annually and $100,000 over three-year period. That means that you would max out your credit by giving a $100,000 contribution, which would qualify you for $50,000 in Delaware Tax Credits.

Each year there is a maximum of $1,000,000 in tax credits available statewide. Credits are very competitive, and are available on a first come, first served basis. You may apply for credits at any time during the year. Applications received before July 1 “reserve” credits before they are officially available from the state on July 1, so it makes sense to make any contributions prior to June 30th to maximize your chance of approval.

The Process

1.  Determine your eligibility. The NAA Tax Credit is available to any individual or business paying income tax in Delaware and whose contribution is made to an approved NAA non-profit organization.

2.  Identify your nonprofit organization of choice. Review the list of approved NAA programs by visiting http://www.destatehousing.com/OtherPrograms/ot_naa.php.

3.  Make a contribution. Contributor must meet the minimum contribution amounts. The minimum a business must meet is $10,000 while the minimum an individual must meet is $2,500.  The maximum contribution cannot exceed $100,000 per tax year. ($50,000 maximum credit).

4.  Complete your application. NAA donor applications are accepted via the NAA web portal exclusively and uploaded by the qualified nonprofit. DSHA grants access to the NAA web portal to the nonprofit.

Non-profit Eligibility Requirements

Organizations must be designated as 501(c)(3) organizations by the Internal Revenue Service and document that they provide neighborhood assistance in an impoverished area, or provide neighborhood assistance for low- and moderate-income families.

Qualified purposes of nonprofits are considered eligible if they provide any of the following assistance:  

  1. Community Services
  2. Crime Prevention
  3. Economic Development
  4. Education
  5. Affordable Housing

The list of qualified organizations runs the gamut from Girl Scouts and Girls on the Run to Habitat for Humanity, Light Up the Queen, TeenSHARP and many, many more.

Everyone Benefits through the NAA

This is truly a win-win program. Taxpayers benefit from their reduced tax liability and their freedom of choice in how their funds are used, while businesses enhance their image in the community. Nonprofits enjoy increased funding for community activities, the possibility of long-term partnerships, increased business interest in their nonprofit mission, and a new opportunity to educate taxpayers. Impoverished communities and residents with low and moderate incomes enjoy the benefits of expanded programs that develop youth and build healthier communities.

Every state’s benefits and requirements differ, so it’s best to do an internet search for Neighborhood Assistance Act or Neighborhood Assistance Program for your own state to learn more about what your state offers.  If you are in Delaware and have any questions or need further assistance, please contact Angie Lord at 302-739-0211 or email angie@destatehousing.com.

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