How does a tax credit differ from a tax deduction?
A tax deduction reduces the amount of total income on which taxes are based. A tax credit is used to reduce total tax liability. Generally, a tax credit is worth substantially more than a tax deduction. How are the tax credits reported? Contributors to The Education Alliance will receive a tax credit voucher that lists the amount of the contribution (form WV-NIPA-1). Simply attach the voucher along with a program worksheet (form WVNIPA-2) to the appropriate West Virginia tax form and deduct the tax credit amount from the tax due amount. Does the Neighborhood Investment Program adversely affect federal tax deductions for charitable contributions? No. In fact, the use of NIP tax credits in conjunction with federal tax deductions greatly reduces the cost of the contribution to the donor. With federal and state tax savings combined, a $10,000 contribution to The Education Alliance could cost as little as $3,350.
