Educational tax credits are a direct reduction in taxes that fully or partially refund expenditures made by parents or others for educational expenses such as tutoring, books, computers, and in some states, private school tuition. State legislation determines the amount of credit and which educational expenses qualify. In some states, families with no tax liability can receive a refund for some or all of the amount spent.

Educational tax deductions allow for a certain amount of educational expenses to be deducted from taxable income prior to the calculation of tax liability. A family with no tax liability will receive no benefits from this type of program.

Limited school tax credits or deductions (that include both private school tuition and public school expenses) exist in Minnesota, Illinois, Iowa, Pennsylvania and Florida.

The Florida Corporate Income Tax Credit Scholarship Program has been in effect since January 2002. It provides dollar-for-dollar Florida corporate income tax credits to businesses that make contributions to nonprofit organizations that give scholarships of up to $3,500 to low-income students. Corporations may contribute up to 75 percent of the amount of their tax due. Contributions are capped at $5 million to any single scholarship funding organization and there is now an $88 million overall annual cap.

Pennsylvania established the Educational Improvement Tax Credits (EITC) in 2001. The EITC gives tax credits to businesses that contribute to scholarship organizations or towards educational improvement organization in public schools. Pennsylvania�s tax credit is for 75% of a corporation�s contribution of up to $200,000, or 90% of their contribution, if they contribute for more than one year. Total tax credits authorized for both the scholarship and educational improvement programs credits are limited annually to $40 million � $26.7 million for the scholarship program and $13.3 million for educational improvement. Credits are awarded to participating businesses on a first come, first served basis until the cap is hit.

Since 1998, Arizona taxpayers who donate to a school tuition organization (STO) of their choice receive a dollar-for-dollar tax credit up to a maximum of $625. STOs are nonprofit organizations required by law to allocate at least 90 percent of their revenue to scholarships or grants for students to attend private schools. STOs are permitted to choose the schools for which they provide scholarships and are free to decide which students receive scholarships and in what amounts. Parents, in turn, choose the STO to which they will apply to for assistance, based on the schools the STO serves. Because the STOs set their own parameters, the size of scholarships varies. Arizona taxpayers may also claim up to $200 (matched dollar-for-dollar by the state) for donations to public schools.


Many states already have a tuition tax credit on the books, but it applies only to tuition paid to public and private colleges, not K-12 schools. Currently, tuition tax credit programs sponsored by the federal government are the Lifetime Learning Credit and the Hope Scholarship Credit, but both only apply to post-secondary education.

Individuals supporting tax credit and tax deduction proposals should be careful to make sure such legislation benefits low-income families equally, either through donations to private scholarship programs that cover private school tuition, tutoring and other supplementary services, or supplementary education programs and teacher training costs in public schools.

© 2004 Black Alliance for Educational Options
1710 Rhode Island Ave. NW, Floor 12, Washington, D.C. 20036 | phone: (202) 429-2236 | fax: (202) 429-2237