Blog - Education Tax Breaks

Illinois Voucher Tax Credits Don’t ‘Invest in Kids,’ They Invest in Inequality

June 12, 2023 • By Carl Davis

By allowing their school privatization tax credit to expire at the end of the year, Illinois lawmakers can take a meaningful step toward better tax and education policy, and a clear show of support for our nation’s public education system.

School’s In: Tackling College Affordability Through State Tax Codes

January 11, 2022 • By Brakeyshia Samms

Given that a sweeping federal solution to the college affordability crisis does not appear to be on the immediate horizon, it is even more important that states take whatever steps they can to expand college access and affordability. While most of that effort will need to occur on the spending side of the ledger—such as through lowering tuition costs, expanding financial aid, or perhaps even funding free college outright—tax policy also has a role to play.

ITEP Urges IRS to End SALT Workaround Scheme for Businesses 

January 29, 2020 • By Carl Davis

A new IRS proposal could once again allow wealthy business owners to use state charitable tax credits–including tax credits for donating to support private and religious K-12 schools–to dodge the federal government’s $10,000 cap on state and local tax (SALT) deductions.

IRS’s SALT Workaround Regulations Should be Strengthened, Not Rejected

August 13, 2019 • By Carl Davis

Lawmakers are seeking to achieve a backdoor repeal of the $10,000 cap on deductions for state and local taxes paid (SALT) by invalidating recent IRS regulations that cracked down on schemes that let taxpayers dodge the cap. If successful, their efforts would drain tens of billions of dollars from federal coffers each year, with the vast majority of the benefits going to the nation’s wealthiest families.

New SALT Workaround Regulations Narrow a Tax Shelter, but Work Remains to Close it Entirely

June 11, 2019 • By Carl Davis

Today the Internal Revenue Service (IRS) released its final regulations cracking down on a tax shelter long favored by private and religious K-12 schools, and more recently adopted by some “blue state” lawmakers in the wake of the 2017 Trump tax cut. The regulations come more than a year after the IRS first announced the […]

ITEP Resources on Proposed SALT Workaround Regulations

June 5, 2019 • By Carl Davis

After states implemented laws that allow taxpayers to circumvent the new $10,000 cap on deductions for state and local taxes (SALT), the IRS has proposed regulations to address this practice. It’s a safe bet the IRS will try to crack down on the newest policies that provide tax credits for donations to public education and other public services, but it remains to be seen whether new regulations will put an end to a longer-running practice of exploiting tax loopholes in some states that allow public money to be funneled to private schools.

What to Watch for When the IRS Releases Its SALT Workaround Regulations

April 1, 2019 • By Carl Davis

The Treasury Department and IRS last summer proposed regulations that would make it more difficult for taxpayers to avoid the $10,000 cap on deductions for state and local taxes (SALT). Now, likely days away from the unveiling of the final version of IRS regulations on SALT cap workarounds, Carl Davis recaps the finer points ITEP will be watching for when the regulations become public.

Twelve States Offer Profitable Tax Shelter to Private School Voucher Donors; IRS Proposal Could Fix This

October 2, 2018 • By Carl Davis

A proposed IRS regulation would eliminate a tax shelter for private school donors in twelve states by making a commonsense improvement to the federal tax deduction for charitable gifts. For years, some affluent taxpayers who donate to private K-12 school voucher programs have managed to turn a profit by claiming state tax credits and federal tax deductions that, taken together, are worth more than the amount donated. This practice could soon come to an end under the IRS’s broader goal of ending misuse of the charitable deduction by people seeking to dodge the federal SALT deduction cap.

IRS Reopens Tax Loophole Sought by Sen. Toomey, but it Won’t Work in Pennsylvania

September 20, 2018 • By Carl Davis

A recent IRS clarification, which appears to have been a pet project of Sen. Pat Toomey (R-PA), has been widely interpreted as reopening a loophole the agency had proposed closing just weeks earlier. But while the announcement creates an opening for aggressive tax avoidance in many states, Pennsylvania, ironically enough, isn’t one of them.

As IRS Prepares to Act, Red-State Taxpayers Profit from Use of SALT “Workaround Credits”

May 24, 2018 • By Carl Davis

A new ITEP report explains the close parallels between the new workaround credits and existing state tax credits, including those benefiting private schools. The report comes the same day that the IRS and Treasury Department announced they would seek new regulations related to these tax credits. It notes that the SALT workarounds are emblematic of a broader weakness with the federal charitable deduction. And it cautions regulators to avoid a “narrow fix” that will only address the newest SALT workarounds (which, so far, have only been enacted in blue states) without also addressing other abuses of the deduction, which have…

New Tax Subsidy for Private K-12 Tuition in Massachusetts Creates a Host of Problems

May 9, 2018 • By Carl Davis

Last year’s federal tax cut bill changed 529 college savings accounts in a major way, expanding them so that they can be used as tax shelters by higher-income families who choose to send their children to private K-12 schools. This controversial change was added in the Senate by the slimmest of margins—requiring a tie-breaking vote […]

Why the Minute Federal 529 Provision Has Huge Consequences for States

February 23, 2018 • By Ronald Mak

When Republican leaders rushed through an overhaul to the federal tax code over a seven-week legislative period, they failed to acknowledge that many provisions in their bill would have negative consequences for states. One such provision of the Tax Cuts and Jobs Act that undermines state laws is the expansion of federal tax breaks that now allows taxpayers to use 529 savings plans to pay for private K-12 education.

Private Schools Donors Likely to Win Big from Expanded Loophole in Tax Bill

December 14, 2017 • By Carl Davis

For years, private schools around the country have been making an unusual pitch to prospective donors: give us your money, and you’ll get so many state and federal tax breaks in return that you may end up turning a profit. Under tax legislation being considered in Congress right now, that pitch is about to become even more persuasive.

Private School Voucher Credits Offer a Windfall to Wealthy Investors in Some States

August 30, 2017 • By Carl Davis

State lawmakers who want to send public dollars to private schools have devised a shrewd tactic for getting around political and constitutional obstacles that make it difficult to do so. These lawmakers found a way to pay high-income taxpayers to fund those schools on states’ behalf, sometimes even offering those taxpayers a tidy profit in […]

It’s a Fact: Voucher Tax Credits Offer Profits for Some “Donors”

August 9, 2017 • By Carl Davis

In nine states, tax rewards gained by donating to fund private K-12 vouchers are so oversized that “donors” can turn a profit.  This is the shocking but true finding of a pair of studies released by ITEP over the last year.

Investors and Corporations Would Profit from a Federal Private School Voucher Tax Credit

May 17, 2017 • By Carl Davis

A new report by the Institute on Taxation and Economic Policy (ITEP) and AASA, the School Superintendents Association, details how tax subsidies that funnel money toward private schools are being used as profitable tax shelters by high-income taxpayers. By exploiting interactions between federal and state tax law, high-income taxpayers in nine states are currently able […]