Noteworthy tax credit opportunities for healthcare providers

April 1, 2020

Looking for ways to reduce your taxable income while contributing to a cause that hits close to home?

Looking for ways to reduce your taxable income while contributing to a cause that hits close to home?

State tax credit programs that benefit rural hospitals could be just the outlet you need. These state-run programs allow taxpayers to direct a certain amount of their tax dollars to rural hospitals in need. 

Since we reside in Atlanta, we are most familiar with the Georgia HEART program outlined below, but other states offer similar programs. Check with your state revenue department to learn if such options are available to you.

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What is a tax credit?

A tax credit is a dollar-for-dollar reduction in your taxes due. Tax credits are offered as ways to incentivize certain contributions that benefit the economy, a certain group of people, the environment, or other philanthropic causes. For example, some states may offer tax credits for those who invest in energy-saving upgrades in their home.

Tax credits are not the same as deductions. In fact, they can be far more beneficial than deductions since deductions only reduce the amount of your taxable income while credits directly lower your total tax liability. A $20,000 tax credit, for example, would save you far more than a $20,000 reduction in your taxable income.

For physicians, then, healthcare related tax incentives can be a win-win. Here are a few examples:

 

The Georgia HEART Hospital Program

For years, Georgia’s rural hospitals have faced a severe financial crisis that has jeopardized rural Georgians’ access to adequate healthcare. In order to ameliorate the situation, the Georgia General Assembly passed legislation that awards state income tax credits to individual and corporate taxpayers who contribute to qualified rural hospitals and organizations (RHOs) throughout the state. Currently, 58 hospitals are eligible to participate.

Contributions can be made from January 1st through June 30th of each taxable year and are limited as followed:

  • Single filers or head of households can receive a 100 percent Georgia income tax credit for contributions up to $5,000.

  • Marries couples filing jointly receive a 100 percent credit up to $10,000.

  • Individual members of an LLC, shareholders of an “S” Corporation, or partners in a partnership are allowed 100 percent credit for up to $10,000 of the amount they contributed to an RHO so long as they would have paid GA state income tax in that amount of their share of the taxable income from the pass-through entity.

  • “C” Corporations or trusts are allowed 100 percent GA income tax credit for contributions to RHOs equal to the amount of the contributions, or 75 percent of the corporation or trust’s income tax liability, whichever is less.

Unlike some tax credits, the total amount of the RHO tax credit cannot exceed the taxpayer’s income tax liability; however, any unused credit can be used against the taxpayer’s succeeding five years’ tax liability. In other words, a donor has five years to claim the entirety of their credit. 

In order to receive the tax credit, individuals must apply for pre-approval. 

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The New Mexico Rural Health Care Practitioner Credit

Unlike the Georgia-sponsored program which runs on monetary contributions, this program benefits certain healthcare professionals working in rural, underserved areas of New Mexico.

A $5,000 credit is awarded for doctors, osteopathic physicians, dentists, clinical psychologists, podiatrists, and optometrists.

A $3,000 credit is awarded for licensed dental hygienists, physician assistants, certified nurse midwifes, certified registered nurse anesthetists, certified nurse practitioners, and clinical nurse specialists.

 

Determining How Much to Contribute

When determining how much to contribute, you’ll need to check your state’s guidelines for donation limitations. It is also best to consult your financial professional to determine which strategies most benefit you.  

These tax credits offer physicians a chance to redirect their tax dollars where it is most meaningful to them and some plans also result in savings on their own tax bill.  It’s a way to make an impact on areas that struggle to afford adequate healthcare.

Julianne F. Andrews, MBA, CFP, AIF is a principal and co-founder of Atlanta Financial Associates. She specializes in working with physicians and executives in the healthcare industry. Her passion for working with physicians comes from being a pediatrician’s spouse for more than three decades. Julie has been featured on Forbes’ list of America’s Top Women Wealth Advisors since 2017 as well as Forbes’ Best-in-State Wealth Advisors since 2018. Julie can be reached at jandrews@atlantafinancial.com.