Tax Credit Scholarships

Since every state mandates compulsory education, programs like tax credit scholarships are a way to ensure families have more than just their assigned district school as an option.

Since April 15th is typically “tax day,” today seemed like a good time to focus on tax credit scholarships.

When taxpayers donate to nonprofit organizations that fund private school scholarships, they can get whole or partial tax credits through tax credit scholarships. Individuals could earn tax credits for gifts to private school tuition organizations under the first program, which was enacted in Arizona in 1997. Corporate tax credit scholarships were adopted in Pennsylvania and Florida in 2001, allowing firms to obtain tax credits for scholarship donations. Other states have followed suit, and tax credit scholarships are currently available in 21 states.

With such a lengthy history, it's not difficult to locate examples of students whose lives have been transformed by tax credit scholarships.
  • Doritha Greene is a mom who used the Florida Tax Credit Program to send her children to a school that worked better for them. A former foster child, she says the scholarship gave her family the support they needed. “My kids experienced a lot of bullying growing up, for various reasons. Because of that, and also in the neighborhood we live in, I can’t just send them to our district schools, they’re not great.” Through the scholarship, she’s been able to send her kids to a school they love. “They want to go to school, even though when they were in public school, they didn’t want to go to school. Now they can’t wait to go,” she says.
  • Patrick and Liz Cunha adopted their grandchildren and are using Arizona’s tax credit scholarships to send them to a Christian school. They praise the scholarship programs, saying without them they wouldn’t be able to afford to send the kids to their current school: “These organizations have made Christian education possible for our children. We’ve seen them not only grow academically and spiritually, but also develop socially and physically by being involved in sports, choir, student council and giving back to others through mission projects.”

Last year, we saw a new twist on tax credit scholarships: Kentucky and Missouri passed tax credit education savings accounts (ESAs). Individuals or businesses receive a tax credit in exchange for donating to a scholarship organization, which is comparable on the donor side. ESAs, on the other hand, provide a wide choice of options for recipients. While tax credit scholarships are usually confined to private school tuition, ESAs can be used for a wide range of educational expenses, including tuition, online classes, homeschool curricula, special needs programs, and more. Unfortunately, school districts sued to block Kentucky’s program from being implemented, so it’s currently on hold. The Missouri program is under development.

Tax credit scholarships, particularly tax credit ESAs, are a terrific method to provide families more options when it comes to education. They are less prone to onerous rules since they are sponsored by private donations rather than taxes. However, because this funding structure is reliant on contributors being able to pay each year, it comes with its own set of issues. State donation caps also mean that both children and donors are frequently turned away. In Pennsylvania, for example, the most recent data shows more than 75,000 student scholarship applications were rejected while the state waitlisted $116 million in potential K‑12 scholarship donations.

Because compulsory education is mandated in every state, programs like tax credit scholarships help to ensure that families have more options than their assigned district school. When it comes to education, we've seen again and time again that one size does not fit all. Scholarships based on tax credits help provide possibilities for a wide range of households.

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