Mega State Tax Credit

Dear Clients & Friends,

What if I told you that instead of paying $20,000 in state taxes, you could donate $20,000 to charity and pay only $2,000 in taxes? So, your outflow would go up from $20k to $22k, but 90% of that amount would be diverted from the state to charity. Pretty amazing, no? Read on…

This weekend’s article is primarily for Pennsylvania residents, but everyone should read it because these types of opportunities are not exclusive to this one state. In fact, despite our home office being in PA, only 26% of our clients live in the Keystone State.

That being said, the Educational Improvement Tax Credit Program allows a Pennsylvania resident to donate to a qualified educational institution and get a 90% tax credit in return. Not a deduction, a CREDIT! Those of you who know us well (which is most of our readers) know that one of our core philanthropic endeavors is supporting underserved school districts, primarily in minority neighborhoods. Education is everything - it is the key to breaking the cycle of poverty, it is the ticket to a better life. Can you imagine diverting that kind of money away from politicians and directly into the hands of suffering school districts? I thought it was too good to be true when I first learned about it, but it’s not. Its real. And MOR Wealth Management began participating in the program this past year.

Here’s the breakdown…

What is the EITC/OSTC?

The Educational Improvement Tax Credit (EITC) and Opportunity Scholarship Tax Credit (OSTC) programs allow individuals and businesses in Pennsylvania to redirect a portion of their state tax liability to a designated non-profit scholarship organization. These organizations then direct your dollars to support children from low and moderate-income families, allowing students to attend non-public schools they wouldn’t otherwise be able to afford. It's like choosing how your taxes are spent — a rare superpower in the world of finance.

How It Works:

• You make a donation to a qualified scholarship organization.

• In return, you receive a PA state tax credit equal to 75% or 90% of the donation.

  • A 1-year donation gets you a 75% credit.

  • A 2-year commitment gets you the full 90% for both years.

  • You can also do this indefinitely (or until the program ceases to exist), and you would continue to receive the 90% credit each year.

For example: let’s say you would like to make a 2-year commitment, and your typical PA tax liability is $10k each year. You could make a $10k donation this year, receive a tax credit of 90% (or $9,000), and pay $1k to Pennsylvania to cover the remaining tax bill. All in all, you spent an extra $1k this year, but you were able to give $10k to an amazing cause. The next year, you would do the same thing (since I mentioned this was a 2-year commitment).

The Caveats:

• The tax credit is non-refundable, so if you contribute more than your PA tax liability, you aren’t able to roll any excess refunds to the following year.

• The donation must be made through a Special Purpose Entity (SPE), which is essentially a pass-through partnership set up specifically for this purpose. (We can help you with this.)

• While you do receive a tax credit, the credit won’t be received until the second half of the following year. Meanwhile, your taxes are still due by the filing deadline (typically April 15th). So there may be 6 months or so between when you pay your taxes and when the credit is received.

  
  

Why All This Matters

Pennsylvania ranks among the most active states for school choice, and these tax credit programs have helped thousands of students access education they otherwise couldn't afford. Many of these kids live in under-resourced districts or have special needs that aren’t being met by their assigned public school.

You don’t have to be a parent or an educator to care about that. If you’ve ever believed that education is the key to opportunity, here’s your chance to support that belief with action. The best part? You don’t have to sacrifice your own financial health to do it.

Timing & Action Steps

Most SPEs accept new participants in the spring and summer — but spots often fill quickly, so it’s wise to get on their radar early. If you're interested in participating in the 2025 cycle, let us know now. We'll help coordinate with a qualified SPE and your CPA to make sure everything is handled smoothly.

As always, we’ll ensure this fits comfortably within your broader financial strategy.

Final Thoughts

At MOR Wealth Management, we’re passionate about helping our clients grow their wealth with intention and purpose, and that includes using financial power to uplift others when possible. The EITC and OSTC programs are a rare opportunity to literally redirect your tax dollars toward a cause you care about, while also receiving a compelling financial benefit.

If you’d like to learn more, or you’d like to be added to the list of potential donors, just reply to this message. We’re happy to walk you through the process.

Wishing you a peaceful weekend,

Greg and your team at MORWM

Mor Wealth Management, LLC does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.