December 5, 2006
TAX CREDITS AND DEDUCTIONS FOR PRIVATE SCHOOL TUITION
By: Judith Lohman, Chief Analyst
You asked which other states allow income tax credits or deductions for families' costs to send their children to private elementary or secondary schools.
A tax credit reduces the amount of a person's tax; a tax deduction reduces the amount of income that is subject to the tax.
Of the 45 states with state personal income taxes, four provide either a credit or a deduction on state income taxes for educational expenses that can include tuition or fees for sending a child to a K-12 private school. The four states are: Illinois, Iowa, Louisiana, and Minnesota. Minnesota's law is the most generous in that it provides both a deduction and a credit. The credit is available for families with household incomes under $37,500. The deduction is available to all families. Illinois and Iowa have credits equal to 25% of eligible expenses. Illinois caps its credit at $500 per family. Iowa excludes expenses for religious teaching from the eligible expenses. Louisiana is the only state that provides a flat-dollar, per-child credit.
Each law is summarized more fully below. Information comes from the Education Commission of the States, the Commerce Clearinghouse state tax law database, and state statutes.
Illinois gives a parent or guardian a tax credit of 25% of qualified education expenses for each of their children who lives in Illinois and is enrolled in any Illinois public or private K-12 school. To be eligible for a credit, the expenses must exceed $250 and be incurred for school tuition or book and lab fees. The school must comply with federal civil rights laws.
The maximum annual credit is $500 per family. It is not refundable (35 Ill. Compiled Stats. § 5/201(m)).
Iowa gives taxpayers a nonrefundable tax credit equal to 25% of the first $1,000 they pay for tuition and textbooks for each dependent who attends a nonprofit elementary or secondary school in the state. The school must have been approved and accredited by Iowa's State Board of Education and comply with state and federal civil rights laws.
The credit applies only to expenses for textbooks and other instructional materials relating to subjects commonly and legally taught in the Iowa public schools and does not extend to materials used to teach religion. The same restriction applies to the tuition expenses eligible for the tax credit (Iowa Code § 422.12 (2)).
Louisiana gives taxpayers a nonrefundable tax credit of up to $25 for educational expenses for each child in grades K-12, if the taxpayer is required to file a state return and claims the child as a dependent. The educational expense credit was suspended from tax year 1999 through 2005, but was restored starting in tax year 2006. The law does not define eligible educational expenses (La. Rev. Stats., § 47.297(D)).
Minnesota allows both a tax credit and a tax deduction for education-related expenses.
It allows a tax deduction of up to $1,625 for elementary, and $2,500 for secondary, public or private school expenses for tuition, textbooks, transportation, academic summer camps, summer school, and similar items, including up to $200 of the cost of a personal computer and educational software (Minn. Stats., § 290.01 (19b)(3) and § 290.0674).
The state also allows a refundable tax credit equal to 75% of educational expenses for a child in grades K-12 if a family's income is less than $33,500. The maximum credit is $1,000 per student and $2,000 per family. For families with incomes between $33,500 and $37,500, the maximum per-child credit drops by $1, and the maximum credit per family by $2, for each $4 of income over $33,500. In addition, for these higher-income taxpayers, the credit is not refundable. Taxpayers whose household income exceeds $37,500 are not eligible for the credit but may take the deduction described above.
Expenses eligible for a credit are the same as for the deduction, except for tuition expenses, which are not eligible for the credit. A taxpayer can take the deduction for any eligible expenses that exceed his maximum credit.