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kmanogue
New Member

Can I record my donation to a state 501(c)(3) organization as both a deduction on my Federal tax return AND a credit on my Alabama state tax return?

Other answers from the TurboTax community seem to imply this is acceptable but it seems like the IRS would see this as "double-dipping".  TurboTax provides a warning to avoid incorrectly categorizing the donation twice (see screen shot).  The organization is a Scholarship Granting Organization recognized in Alabama as a 501(c)(3) with one-for-one credit on state taxes.

6 Replies
MaryK1
Level 9

Can I record my donation to a state 501(c)(3) organization as both a deduction on my Federal tax return AND a credit on my Alabama state tax return?

Sorry quick edit, when you complete the Alabama state tax return, some of the charitable donations deductions are not transferred, but the scholarships are, from the federal return so they allow you take a credit for any qualified contributions.  You would only add these specific contributions if you did not itemize on your federal tax return.

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kmanogue
New Member

Can I record my donation to a state 501(c)(3) organization as both a deduction on my Federal tax return AND a credit on my Alabama state tax return?

Thanks for the quick response!  I just edited my question to include a screen shot that appears to say that TurboTax HAS transferred by donation deductions from my federal return.  Am I interpreting the "Note" correctly?
MaryK1
Level 9

Can I record my donation to a state 501(c)(3) organization as both a deduction on my Federal tax return AND a credit on my Alabama state tax return?

Yes, I edited as soon as I saw the screen shot- because of course there is always an exception (or two) and that is a specific one that does not occur often which is why I did not think of it.  If you deducted on federal, you would indicate YES for this question in Alabama
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kmanogue
New Member

Can I record my donation to a state 501(c)(3) organization as both a deduction on my Federal tax return AND a credit on my Alabama state tax return?

Forgive my confusion... the Note says "Do NOT select YES if you already took this donation on your federal tax return because...".  So wouldn't I select NO?

Assuming that I can't do both (federal deduction AND stat credit), wouldn't it be more advantageous for me to claim it as a one-for-one CREDIT?
MaryK1
Level 9

Can I record my donation to a state 501(c)(3) organization as both a deduction on my Federal tax return AND a credit on my Alabama state tax return?

NO is correct- it may be more beneficial as a credit, but it would only apply to Alabama and if you deduct, it reduces the taxable income both federal AND Alabama so it may be better to leave it as deduction- but the only way to know is if you change it and compare
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kmanogue
New Member

Can I record my donation to a state 501(c)(3) organization as both a deduction on my Federal tax return AND a credit on my Alabama state tax return?

Thanks for the help.  It looks like taking the credit on my state taxes is better for me.  The only issue now is that the 2016 state return that I receive in 2017 will be higher (by the amount of the credit) and will count as additional income on my 2017 federal tax return.  So I'm essentially penalized next year for taking the credit this year...!
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