Education Tax Breaks
The ‘Big, Beautiful’ Bill Creates a $5 Billion Tax Shelter for Private School Donors
June 9, 2025 • By Amy Hanauer
On May 22, Congress passed the House reconciliation bill or “One Big Beautiful Bill Act” by a one-vote margin. The bill’s dozens of destructive tax provisions would supercharge inequality and force devastating cuts to health and food aid that have been bedrocks of the American safety net since the 1960s.
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.
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…
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.
Preventing State Tax Subsidies for Private K-12 Education in the Wake of the New Federal 529 Law
February 23, 2018 • By Ronald Mak
This policy brief explains the federal and various state-level breaks for 529 plans and explores the potential impact that the change in federal treatment of 529 plans will have on state revenues.
New Tax Law Allows Affluent Taxpayers to Write off K-12 Private School Tuition
January 9, 2018 • By Matthew Gardner
Taxpayers are still learning about the intended and unintended consequences of the major tax overhaul that Republican leaders ramrodded through late last year. One little-noted provision subverts state laws that prohibit the use of public dollars for private schools by allowing taxpayers to use 529 plans to pay for K-12 tuition. Until last year, the […]
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.
Tax Bill Would Increase Abuse of Charitable Giving Deduction, with Private K-12 Schools as the Biggest Winners
December 14, 2017 • By Carl Davis
In its rush to pass a major rewrite of the tax code before year’s end, Congress appears likely to enact a “tax reform” that creates, or expands, a significant number of tax loopholes.[1] One such loophole would reward some of the nation’s wealthiest individuals with a strategy for padding their own bank accounts by “donating” to support private K-12 schools. While a similar loophole exists under current law, its size and scope would be dramatically expanded by the legislation working its way through Congress.[2]
Parents of College Students: The Tax Plans’ Losers that No One Is Talking About
December 13, 2017 • By Steve Wamhoff
Parents of college students or kids in their last years of high school are more likely to face a tax hike than others under the tax legislation moving through Congress. Higher education has entered the tax debate because the House bill (but not the Senate bill) would repeal several provisions that make college and graduate education more accessible. But little thought has been given to how the tax bills would affect the parents of college students in more direct ways and make it difficult for them to finance college for their kids. If tax legislation were allowed a reasonable number…
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.
New York Times: In Some States, Donating to Private Schools Can Earn You a Profit
May 17, 2017 • By Carl Davis
AASA and the liberal-leaning Institute on Taxation and Economic Policy examined programs in 17 states that send more than $1 billion a year to private schools via tuition tax credits, and concluded that private schools were benefiting from a “federally sanctioned voucher tax shelter” for wealthy taxpayers. The study called it a “get-rich scheme for […]
Report: Private School Voucher Proposal Creates Tax Shelter for Wealthy; Would Starve Public Schools of Critical Funds
May 17, 2017 • By ITEP Staff
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. Further, legislation pending in Congress would create new opportunities for corporations and successful investors to earn huge […]
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 […]
Public Loss Private Gain: How School Voucher Tax Shelters Undermine Public Education
May 17, 2017 • By Carl Davis, Sasha Pudelski
One of the most important functions of government is to maintain a high-quality public education system. In many states, however, this objective is being undermined by tax policies that redirect public dollars for K-12 education toward private schools.
State Tax Subsidies for Private K-12 Education
October 12, 2016 • By Carl Davis
This report explains the workings, and problems, with state-level tax subsidies for private K-12 education. It also discusses how the Internal Revenue Service (IRS) has exacerbated some of these problems by allowing taxpayers to claim federal charitable deductions even on private school contributions that were not truly charitable in nature. Finally, an appendix to this report provides additional detail on the specific K-12 private school tax subsidies made available by each state.
Higher Education Income Tax Deductions and Credits in the States
March 22, 2016 • By Carl Davis
Read full report in PDF Download detailed appendix with state-by-state information on deductions and credits (Excel) Every state levying a personal income tax offers at least one deduction or credit designed to defray the cost of higher education. In theory, these policies help families cope with rising tuition prices by incentivizing college savings or partially […]
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