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Just the FAQs – Tuition Tax Credits and Tax Deductions

As of 2014, 14 states have enacted tax credit-funded scholarship programs, with half of these states enacting their programs in just the past three years. Tax credit-funded scholarship programs now pay tuition for approximately 190,000 students.  The 14 states that currently have tax credit funded scholarship programs are: AL, AZ, FL, GA, IA, IN, KS, LA, NH, OK, PA, RI, SC, VA.  The School Choice Today: Education Tax Credit Scholarships Ranking & Scorecard 2014 provides an in-depth analysis and state-by-state comparison of the 14 tax credit-funded scholarship programs currently in existence.

The following are answers to frequently asked questions (FAQs) regarding tuition tax credit and tax deduction programs. The answers to these FAQs are intended to provide only an introductory overview of key issues.

What Are Tuition Tax Credits and Tax Deductions?

School tax credits refund expenses made toward education up to a fixed figure, while tax deductions minimize the expense of education by making them itemized deductions. The qualifying criteria cover educational expenses such as tutoring, texts, and computers; in the states that have them so far, they also cover private school tuition. State legislation determines the amount of credit and what can be included in the deductions. It also states whether private school tuition qualifies.

Education tax programs fall into one of two categories. The first is a personal use credit, which allows individual families to reduce their tax liability. The second category is a donation tax credit, which allows individuals and businesses to reduce their tax liability by contributing to organizations that disperse funds to families to help them pay for their children’s education.

Won’t These Programs Only Benefit the Wealthy?

No, in fact, the opposite is true. Because donation tax credits create a pool of funds that is explicitly meant to help families pay for their children’s education, they offer more opportunities

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