Education Tax Credits:
 Empowering Parents … Helping Students… Supporting Schools

What is a tax credit?

Tax Credits are a dollar for dollar credit on an individual’s or corporation’s (partnership, LLC etc.) tax bill. Instead of a deduction which reduces the income on which tax is paid, a credit directly offsets the tax bill, literally putting money right back into the taxpayer’s pocket.

What are Education Tax Credits?

They are tax credits specific for educational expenses. Several states have various forms of this (Arizona, Florida, Illinois, Iowa, Minnesota & Pennsylvania) for either personal or business taxes. Tax credits are used to directly offset costs for (depending on the specific state) tuition expenses, tutoring, textbooks, computer hardware and educational software as well as special education expenses.

Other states, such as New York as well as Maryland, New Hampshire, South Carolina & Utah will (or may) propose a tax credit program this year.

Why Education Tax Credits?

Tax credits empower parents to make the choices they feel are best for their children, whether it is supplementing their child’s public education or offsetting the burden of private school tuition.

In addition, tax credits have been upheld as constitutional by the highest courts in several states (Arizona by decision and Illinois by refusal to review Appeals court decisions holding the plan constitutional) as well as by the United States Supreme Court, which both upheld Minnesota’s program in 1983 and refused review of Arizona’s in 1999.

Schools have found these programs a new, useful way to reach out directly to their community for funding and bring in new money to the neighborhood school. Moreover, parents or schools get the funds they need directly and efficiently. There is no government bureaucracy that must manage the process. Those who know best are able to put money where it is needed as it is needed. They have both control and accountability.

What’s available in my state?

Some version of tax credits - corporate or personal - are available in Arizona, Florida, Illinois, Iowa, Minnesota and Pennsylvania.

Currently, New York State is considering two potential versions of a personal tax credit.

In his final proposed budget (the 2006-07 Executive Budget) Governor George Pataki introduces a $500 per child tax credit for parents for educational expenses such as tutoring, enrichment, and as well, for nonpublic school tuition. The credit is for parents making up to $90,000 per year but begins a phase out after $75,000. In addition they must live in an area where at least one school is considered failing by Federal law, which currently includes all of New York City.

Senator Marty Golden and Assemblyman Vito Lopez have introduced a tax credit bill in New York’s Legislature that would provide a sliding scale credit to parents depending on income. Those making less than $40,000 per year would get a $3,500 per child credit while parents making less than $100,000 per year would see a $2,600 per child credit. The credit phases in over a number of years, till it is fully in place in 2011 with a maximum income of under $150,000 and the per-child credit would be $1,100.

What can I do?

Tax credit proposals currently are before the Legislatures in several states, including New York. A rally in support of New York’s initiative is planned for February 14, 2006 in Albany. Make sure you are there. Make your voice heard.

Where can I look for more information?

Visit www.ou.org/public for more information.

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www.ou.org